German model of union power faces new test

After locking horns with striking workers at Tesla in Sweden, Elon Musk will soon be coming up against an even more formidable force. Europe’s largest union is preparing to fight the billionaire X site owner for power at Tesla’s plant in Germany.

“You need to be careful — the rules of the game are different here,” IG Metall’s newly elected boss Christiane Benner warned Musk in October, evoking a transatlantic clash of ideals.

But while the union is working in overdrive to recruit members ahead of an upcoming election of works council representatives at Tesla’s factory in Grünheide — where almost two-thirds of the US company’s European sales come from — its real challenges are actually homegrown.

German industry is uniquely shaped by the system of mitbestimmung, or co-determination, which gives workers at companies with more than 500 employees the right to elect representatives to supervisory boards that appoint executives and oversee strategy. 

The unions’ argument that the German way makes for more stable companies and encourages faith in democracy is widely accepted, as is their role in having protected the country’s vast network of automotive suppliers against the sweeping trend in recent decades to outsource supply chains.

For the past half-century, German companies have come to more than accept their close relationship with the unions. This alliance is embodied by the influential business monthly Manager Magazin’s decision to induct Michael Vassiliadis, leader of the union for energy and chemical groups IG BCE, into its business hall of fame. “The smartest class warrior in the republic,” the business magazine gushed.

But the close tie-up between corporates and unions was for decades buoyed by seemingly never-ending demand for German cars, machines and chemicals in China as well as flows of cheap Russian gas — the two weight-bearing pillars of the country’s export-driven business model that are now showing significant cracks.

High industrial energy prices, which remain double those in the US and China, are prompting German companies to slash their investment plans for next year, according to a survey by the Ifo Institute. A growing number are making plans to shift production abroad.

This is a difficult backdrop for Benner, Vassiliadis and other union leaders, as they argue that German industry has to be saved without compromising the well-paid and tightly guarded blue-collar jobs that Europe’s largest economy is known for.

Current demands by Benner’s IG Metall for four-day work weeks in the steel and iron industries have drawn ire ahead of expected job cuts as companies such as Thyssenkrupp and Salzgitter prepare to make greener steel by building modern plants that require less manual handling.

“Adding an additional cost burden to the situation that this country is in and that industry is in right now just doesn’t make any sense,” said Salzgitter’s chief executive Gunnar Groebler. “This is a difficult message, I understand that, but somebody has to tell the truth.”

IG Metall is also on a collision course at Thyssenkrupp — a conglomerate that once symbolised German industrial might, which is currently in the process of being sold off in bits. Its supervisory board this month appointed two executive board members against the will of its labour representatives. At the steel company, these representatives hold half of the board seats but the chair made a rare decision to use his right to cast a double vote.

“I don’t know if that’s ever happened, at least not in the past decade,” said Daniela Jansen, an IG Metall representative on Thyssenkrupp’s supervisory board. The union is protesting at the company’s decision to add board members at a time when workers are facing job cuts. The management’s decision to simply go around the union has caused outrage.

“This is a declaration of war,” Jansen said, warning that Thyssenkrupp’s new chief executive Miguel López will need the union’s support to go ahead with long-running plans to sell its steel and submarine businesses.

Battles such as these are not only likely to become more frequent as companies and unions alike try to avoid an erosion of Germany’s mighty industrial base but their significance for the future of Europe’s largest economy will also rise.

patricia.nilsson@ft.com