A General Motors works council's response to the capitalist global financial crisis: a case study from Germany.

Author:Klikauer, Thomas
Position::Case study

Introduction: A short overview of IR at GM-Opel, and varieties of capitalism

Unlike Anglo-Saxon industrial relations (IR) that reflect a 'liberal market economy' (LME), German IR has been closer to a 'coordinated market economy' (Hall and Soskice, 2001; Klikauer and Donn, 2004a; Frege, 2005; Jackson, 2007; Towers, 2007, Thelen and Hall, 2009). According to Hall and Soskice's Varieties of Capitalism (2001: 8fl; cf. Hodgson, 1995; Becker, 2009), economic affairs inside LMEs are coordinated via hierarchies and competitive arrangements based on market relationships. This has created an arm's-length exchange of goods and services arranged under competition and formal contracting, where price signals are generated by markets. LMEs are based on supply and demand on the basis of margin calculations. This follows neoclassical economics in enshrining market institutions to coordinate economies.

CMEs, on the other hand, have adopted exchange mechanisms and information transmission inside networks with a high reliance on collaborative relationships. This occurred in Germany despite the current fashion for 'erosion assertion' in German IR (Abrahamson, 1996; Rehder, 2003, 2006; Streeck, 2005a, 2005b, 2007, 2008; Thelen and Kume, 2006; Thelen and Martin, 2007). Business affairs and IR in CME's more social-market oriented economies tend to exclude competition in favour of coordination. Coordination among companies in CMEs occurs as a result of strategic interaction among firms and other actors. Hence Hall and Soskice's (2001) five coordination problems--vocational training, corporate governance, inter-firm relations, employee-management coordination and IR- have found different solutions in LMEs (e.g. AngloSaxon countries) to those of CMEs, as in the case of Germany (Grahl and Teague, 2004; Thelen, 2009a, 2009b).

Despite the popularity of Hall and Soskice's Varieties of Capitalism (2001), with half a million Google hits (April 2011), there are serious shortcomings with this approach:

  1. Contrasting 'Good Capitalism' with 'Bad Capitalism' increases the tendency to forget that these are mere variations on a theme called capitalism, and that this does not alter the pathologies of capitalism (Marx, 1890; Marcuse, 1966: 101; Burkett and Hart-Landsberg, 2003; Watson, 2003; Baumol et al., 2007; Moore, 2009; Bruff and Morton, 2010).

  2. Hall and Soskice (2001) appear to be more interested in differentiating the ways in which competitive advantage can be achieved in LMEs and CMEs than in bringing to our attention the inherent contradictions inside each model, between both models, and in capitalism in general.

  3. It presents each box as producing stability and is slightly determinist, instead of highlighting the dynamics of capitalism at a micro-, meso-, and marco- level (Deeg and Jackson, 2007; Crouch, 2007).

  4. One cannot argue that capitalism is geographically fixed. While capitalism has only one true model--capitalism itself--it has never been determined by geography or nationality because its character transcends nations and geographical locations. Hall and Soskice (2001) tend to gloss over significant variations within their two ideal-types.

  5. Social structures of accumulation such as those activated along the lines of class, race, and gender remain unexplored by Hall and Soskice (2001).

  6. Their approach does not account for what became known as GVCs (global value chains) and GPN (global production networks), which cross over the boundaries drawn by Hall and Soskice (2001; Thompson and Vincent, 2010).

  7. Hall and Soskice cannot be used to 'Eclipse the Reasons' (Horkheimer, 1947) for the enduring social, political, and economical suffering that capitalism causes.

Bearing these shortcomings in mind, their approach is not used to highlight, for example, Germany's CME-like approach to IR as defined by a non-competitive regime of a duality of legal regulation and trade union structures that involve all three actors (state, trade unions/works councils, and employers/management) at the national (federal), industrial (metal), corporate (GMO), factory (Russelsheim, Eisenach, Bochum, Kaiserslautern), and workplace (e. g. final assembly, body shop, paint, etc.) levels (Kochan, Katz and McKersie, 1986; cf. Bernaciak, 2010c: 5). GM's German operations are part of GM, which was founded in 1908 in Flint, Michigan. GM-USA bought GMO in March 1929, and hence the global financial crisis affected not only GM in the USA but also its subsidiary in Germany (GMO).

The global financial crisis (GFC) demanded GMO's attention at the corporate rather the national, industrial and workplace levels. At the corporate level, the duality of Germany's IR means, for example, that issues such as those predominantly belonging to collective bargaining are dealt with externally (Thelen and Wijnbergen, 2003; Haipeter and Lehndorff, 2005). Traditionally, these have been assigned to employers' federations such as Gesamtmetall and trade unions such as the Industrial Trade Union, or the Metalworkers Union (IGM). GMO is part of the metal industry's employer federation, and its workforce is part of the metalworkers' union. Issues related to 'workplace agreements' (Betriebsvereinbarungen) such as work organisation, overtime arrangements, etc. are located at the corporate level (cf. Walton and McKersie, 1965; Walton, Cutcher-Gershenfeld and McKersie, 1994). Often, these rather less conflict-laden issues are negotiated directly between works councils and management (Kotthoff, 1982, 1998). These are negotiated short-term solutions that temporarily halt class conflicts between labour and management. These arrangements can underwrite management's interest in industrial peace in return for what has been termed 'co-management' (Rehder, 2003, 2006; Streeck, 2005a, 2005b, 2007, 2008; cf. Offe and Wiesenthal, 1980; Ramsay, 1977; Hyman, 1974).

In contrast to that, conflicting or distributive issues such as mostly but not exclusively wages, annual leave, weekly, and daily working time, etc., are negotiations between employers' federations and trade unions. This has not resulted in an easing up of German employers to reduce labour's share of national income (cf. Brenner, 2006:20 and 149). Over the last decades, German capitalism engineered a decline in real wages. Simultaneously, productivity had increased significantly, leading to a strongly improved position of German capitalism. This result is due to a rapid decline in unit-labour costs in Germany when compared to other European countries (Brenner, 2006:112 and 173ff; Bernaciak, 2010c: 3). Germany's high productivity with declining wage levels caused considerable frictions within the European Union. This duality externalises 'class war' to unions and employers, and internalises a managerial focus on productivity, products and engineering (Klikauer, 2003, 2005). It organises and coordinates Goodrich's Frontier of Control (1922) between capital and labour.

At GMO's corporate level, there are two forms of organisations that represent workers defining Goodrich's frontier of control (1922; cf. Offe and Wiesenthal, 1980) between management and workers: a legally structured body (works councils, codetermination, and a supervisory council), and trade unions (industrial unions). In the case of car manufacturing, this is the 2.3m-member strong industrial trade union IG-Metall (IGM), representing approximately a third of all workers (cf. Clark, 2006). Trade union organisations are not legally protected, and thus rely on the power of trade union members. At GMO, union members elect shop stewards (Vertrauensleute or 'people of trust') who elect the so-called union Blockies--a governing team (Vertrauensko'rperleitung), including a convener (Klikauer, 2004). Both structures have a history of stable, mutually beneficial but at times also contradictory relationships between GMO's union body, representing a more radical political-economic view, and the works council, representing a more accommodative business-oriented view (Klikauer, 2002a, 2002b; cf. Anner et al., 2006; Behrens, 2009; Bernaciak, 2010c: 2, 22).

At the plant level, IGM's union membership was at 75 per cent in blue-collar areas and 35 per cent in white-collar areas (Franz, 2008), with roughly 500 stewards and area representatives, or Blockies. During 2008 and 2009, the looming demise of GMO in the wake of the GFC demanded several large plant-wide meetings (Seib, 2009). GMO's works council-steward structure created 'new communicative structures' (Klikauer, 2007 and 2008) between workplace unionism and works councils. This enabled GMO's representative structure to 'respond more quickly and comprehensively to external and internal challenges' (Schaffner, 2009; cf. Behrens, 2009). Works councils are elected by all workers in companies without regard to their trade-union membership and political affiliation (cf. Frege, 2002; Addison, Schnabel and Wagner, 2004; Eurofound, 2009a). This established four levels of workers' representation (see Table 1):

These four levels of works councils are linked to GMO's co-determination arrangements, providing an additional structure underwriting a stable relationship between management and workers (Klikauer, 2002a and 2002b; Muller, 1997). The Co-Determination Act of 1976 stipulates a twenty-member strong supervisory board at GMO with ten 'elected' employee members and ten members who are non-democratically 'appointed' by management (Eurofound, 2009b). In 2009, employees were represented by two participants of IGM's Frankfurt head office: one representative with no affiliation, the so-called 'Sprecherausschusse' (Bundesrecht, 2009); and six works council members (Russelsheim: 2, Bochum: 2, Kaiserlautern: 1, and Eisenach: 1). These nine local members were supported by a speciality of GM's German setup, because it includes Cal Rapson (vice president of the United Automobile Workers' Union, USA).

In 2009, GMO's CEO Carl-Peter Forester (Vorstandsvorsitzender and Aufsichtsratsvorsitzender...

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