New wage-model at VW, Germany, 2004

Submitted by Steven. on November 17, 2006

Article analysing new wage structures for 5,000 new manufacturing jobs at Volkswagen in Germany.

From wildcat no. 71, autumn 2004

In search of 5000 talented workers to build automobiles
In November 1999, Volkswagen labor director Hartz presented the new project called “5000 x 5000“ to the public. 5000 working spaces would be established to produce the new Volkswagen “Touran“ model in Wolfsburg (Germany) and Hannover (Germany). The goal would be to bring “work places from abroad“ back to Germany. The project wanted to show that even under German (high-wage) conditions it would be possible to create profitable production.
The basic idea of the project was to produce a number of pieces for a fixed wage of 5000 DM (2556 Euro). Furthermore, there were no surcharge payments allotted for overtime, nightshifts or weekend-work, and no Christmas or summer bonuses and no overtime compensation through time off. Working hours were rolling time from 28.8 to 48 hours per week with Saturday as a normal workday. It was a list of wishes.

The wishes were not in agreement with Volkswagen contract with the Volkswagen Workers Union, so Volkswagen founded a subsidiary company, the Auto 5000 GmbH. At the end of March 2001, Volkswagen started negotiations with IG Metall. In principle, the IG Metall welcomed the concept, but there were some corrections necessary concerning working hours and wages. On July 28, 2001, a collective Auto 5000 agreement, with a duration of three years, was concluded about the conditions of the production of the Touran in Wolfsburg. The results were: 3500 unemployed workers would be hired. They would go through a special application procedure; the application would be processed solely by the Auto 5000 job center. The selected applicant would have to complete a three-month qualification period (paid by the job center), in which they should achieve general suitability for industry. After that, the applicant would have a six-month probation period including: training, more qualification, and building of the efficiency necessary for the demanded quota of the number of pieces. They would get unemployment money and later in the plant, they would get fixed wages of 2045 Euro per month. After completing probation successfully, they would get unlimited employment with a monthly wage of 2300 Euro plus a minimum bonus of 256 Euro, before tax naturally, and an additional personal achievement bonus and a plant-wide production bonus. All of the additional payments would depend on achieving the demanded profit margin. In comparison with the agreement between Volkswagen and its employees in the VW Wolfsburg plant, Auto 5000 employees would earn 20-40 per cent less.

The Auto 5000 contract “stipulates value creating regular working hours“ as 35 hours a week on average per year. They can be expanded to 42 hours a week if necessary. Up to 200 hours can be collected on an overtime account.
Compensation is made through time off or payment with 25 per cent added. The early and late shifts on Saturdays and the start up shifts on Sunday evening count as regular working time. Paid overtime can really only be created by management mistakes. If the number of pieces of the necessary quality is not achieved, it is necessary to do unpaid rework. The responsibility of defects lies with the “team“ that produced them. Weekly, employees have to do three hours of qualification, 1 1/2 hours of which are paid. During the first two years of the contract there is a mutual cancellation period, after that the legal requirements are valid.

There are various additional agreements within the collective Auto 5000 agreement, which “set the form of the working organization“. It is full of demand formulations about how “to create human working organizations“, “varied and holistic working matters“, “flat hierarchy“, and “semi-autonomous teams“ with “advanced options, dispositions and spaces for decisions“. In an appendix about achievement- an employee rating appears to be based on the criteria of the “biological and social reasonability“ of the personal setting.

Additionally, there is a “collective agreement about qualification“: After two years of “continued qualification“, all of the employees of the “Learning Factory“ become “accredited Professionals for Automobile Production“. With a contract for “co-management“, the workers council is allowed to determine the goals of production, personnel numbers and bonuses.
The glorification of the Auto 5000 location and the agreements about “holistic working organization“ and “co-management“ produced a storm of ardor in almost all of the media. Even critical unionistpraised the project. IG Metall celebrated this “innovative model“ in general and the maintenance of the 35 hour week in particular, certainly after the “dramatic negotiations“, as a “remarkable signal for the labor market“.They even noted as an achievement that all successful employees were to be employed after their probation period.

The production of the Touran started in January 2003 (after a delay). By the end of 2004, it should have been completely functioning. Out of 43,000 applicants, 3,780 were chosen for the phase of qualification and finally roughly 3,000 were hired. Almost 90 percent were unemployed before and were better qualified than average. Half of them were from Western Germany and half from Eastern Germany. The composition of the workforce in view of age and gender was typical for automobile production. The average age of Auto 5000 personnel was 32 years old. 149 of the employees in the probation period were not later employed or signed off by themselves.
However, the start up phase could not have flown smoothly. Auto 5000 management needed to integrate “supporters“, workers with Volkswagen-experience, into the Auto 5000 project. All in all, 107 people were added, mostly for the lower management. Now there are four hierarchies: management, leader of the assembly section, engineers and “supporters“.

Obviously, there were clashes with self-confident workers. A social science study paid by Volkswagen and IG Metall reflected what was easy to hear, “They think they can do what they want with us former unemployed.“The study captures those experiences on tiptoes stating, The “raised social sensibility of the unemployed“ and the “demand of self-responsible action“ created a “particularly critical sounding board“ for however inevitable conflicts. “The still highly motivated crew gives, just like the representatives of the concept in management and in workers council do, reason for good chances to hold the project on a successful track and contribute to a renaissance of even, enhanced industrial production work in Germany.“ (SOFI Göttingen: interim report about the project 5000x5000)

prol-position news #1, 3/2005