Learning from the East

By Theil, Stefan | Newsweek International, September 30, 2002 | Go to article overview

Learning from the East


Theil, Stefan, Newsweek International


When the German automaker BMW decided to build a new assembly plant for its 3 Series sedan, executives scouted 250 locations around the world. They considered sites in France and the Czech Republic, where lower wages and a friendly regulatory climate meant they could operate more cheaply and efficiently than in high-cost Germany. But in the end they picked a green field outside Leipzig, in Germany's east. The reason: labor costs that are more than a third lower than in western Germany, coupled with a flexible agreement with the local union that would allow BMW to run its plant 140 hours a week--not quite 24/7, as you might find in some parts of the globe, but as close to it as BMW could wish.

The deal, says BMW spokesman Hubert Bergmann, is better than the company could have gotten anywhere else in Europe. And it's clearly good for Leipzig and surrounding towns, which stand to gain some 11,000 new jobs when the plant opens in 2005. Perhaps most important, it's a sign of good news for eastern Germany as a whole. The former German Democratic Republic still suffers from the legacy of half a century of communist mismanagement, despite half a trillion euros in reconstruction subsidies. Unemployment is more than twice the national average, and incomes are lower. But as the example of BMW shows, there are cases where the east is working--and that's often in places that are conspicuously more business friendly than in Germany's west.

Think of them as oases of economic modernity, islands of corporate independence where local officials, workers and union leaders are willing to bend (or even ignore) the thousands of pages of rules and regulations that trammel businesses in the rest of the country. It's a spirit of rebelliousness that you don't often find in Germany's consensus-driven society, and Wolfgang Heinze, for one, considers himself something of a guerrilla in an emerging movement. "We east Germans didn't launch a revolution against communism just to get make- work jobs, 100 percent sick pay and big welfare checks," says the general manager of the Dresden subsidiary of Southwall Technologies in Palo Alto, California. …

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