The German automaker Volkswagen is in the spotlight since it announced restructuring plans. With Volkswagen currently considering the closure of four German plants, the prime focus is on the industry’s 35-hour work week. Amid high labour costs, the future of German auto production seems uncertain. The automaker alleges that high domestic costs bring down profits making cost cut necessary at a time when cheaper models from abroad are stealing market share.
The contentious issue of extending work hours by five extra hours to avoid layoffs and increase productivity has arisen. In Germany’s metalworking industry, the 35-hour week is the full-time standard for many production workers, including large parts of the auto sector due to strong unions and labour regulations.
The emergence of this agreement can be traced back to the 1980s and 1990s when IG Metall union, which represents most Volkswagen workers in Germany, collectively bargained under the slogan “More time to live, love, laugh”. In 1984, the agitation stretched as long as seven weeks when West German metal industry workers protested and negotiated.
Can five extra hours a week help Volkswagen cut costs and save jobs?
While the and unions are in disagreement over this concerning issue, let’s find out whether extending work week by five extra hours can solve Volkswagen’s problems.
- Praising luxury Mercedes-Benz for its cost cutting measures and pushing unions to agree to longer working hours for the same pay, Minister President of Saxony Michael Kretschmer advocated for a 40-hour week, Reuters reported. Notably, Volkswagen’s Zwickau plant in Saxony faces closure threat.
- However, fellow conservative, Kretschmer and Chancellor, Friedrich Merz cautioned that the 35-hour week harms as he pointed out that any change to labour contracts must be negotiated between unions and employers.
- Auto industry analyst Ferdinand Dudenhoeffer estimated the cut in labour costs if standard working week of 40 hours is introduced. He suggested that the revision in working hours will bring down hourly labour cost of €65 by almost 13% which will helping German auto plants maintain and increase current production.
- ING chief economist Carsten Brzeski blamed structural gap for Volkswagen’s operating issues as he argued that five more contractual working hours a week would not have have a significant impact when compared with low-cost industrial locations like China.
- According to unions and some industry observers, the German automaker also has a demand problem and this is not solved simply by working more, Reuters reported.
Comparing German autoworkers with those in Spain and China
German autoworkers are one of the highly paid and most expensive as this Western European country has some of the highest automotive labour costs in the world. Labour cost is Germany is nearly $3,307 per vehicle against $955 in Spain and $597 in China.