How German Labor Could Kill VW's Southern Expansion

A blog about business and economics.
Feb. 19 2014 9:23 AM

How German Labor Could Kill VW's Southern Expansion

466919981-the-volkswagen-carmaker-logo-is-pictured-at-the-12th
Das idle threat?

Photo by Sajjad Hussain/AFP/Getty Images

We had an interesting fight last week where the United Automobile Workers were trying to organize a Volkswagen plant in Chattanooga, Tenn., under unusually favorable conditions because VW corporate wasn't fighting the unionization effort. Nonetheless, the UAW was hardly uncontested—Republican politicians throughout the state argued that a union at the VW plant would kill the auto industry in Tennessee—and the workers narrowly rejected the union in a vote.

Advertisement

This is probably an idle threat that isn't going to come to pass. But it's at least possible that it could. And there are three reasons for that.

  • The biggest is that the background conditions in Germany and the United States are quite different. German firms, by law, have boards of directors that represent both workers and shareholders. The price-to-book ratio of publicly traded Germany companies is systematically lower than in the United States for this reason. In America, in the long run the shareholders get there way. In Germany, the workforce is able to override shareholder perogatives at key times.
  • The second reason is unique to Volkswagen, namely that one of the largest shareholders in the company is the German state of Lower Saxony. So the board is split 50-50 between labor representatives and shareholder representatives. But one of the shareholder representatives is Stephan Weil, the minister-president (prime minister, basically) of Lower Saxony, and another is Olaf Lies, the minister of economic affairs and labor for Lower Saxony. Weil and Lies took office about a year ago, leading a coalition of Social Democrats and Greens after 10 years of center-right rule in the province.
  • The third reason is that in big picture German politics, the Social Democrats entered Angela Merkel's coalition in December. Andrea Nahles, the new labor minister, is a member of IG Metall—the same German union that represents Volkswagen's workers—and I know that American labor groups have for years been talking to her and other IG Metall players about the long-term threat to German labor posed by the possibility of using the United States as a platform for low-wage manufacturing.

All that said, it's long been the case that the management of German firms has been able to finesse these kind of tensions. German labor unions are ultimately accountable to German workers, not to American unions or American labor interests. Lots of companies, ranging from BMW to Deutsche Telekom (known in the U.S. as T-Mobile), have been able to practice union-friendly codetermination in Germany, and union-hostile American-style management in the United States of America. But a fired-up IG Metall plus a fired-up Social Democratic Party do currently have the objective leverage to force policy decisions on Volkswagen.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Politics

Talking White

Black people’s disdain for “proper English” and academic achievement is a myth.

Hong Kong’s Protesters Are Ridiculously Polite. That’s What Scares Beijing So Much.

The One Fact About Ebola That Should Calm You: It Spreads Slowly

Natasha Lyonne Is Coming to the Live Culture Gabfest. Are You?

A Jaw-Dropping Political Ad Aimed at Young Women, Apparently

The XX Factor
Oct. 1 2014 4:05 PM Today in GOP Outreach to Women: You Broads Like Wedding Dresses, Right?
Crime

Operation Backbone

How White Boy Rick, a legendary Detroit cocaine dealer, helped the FBI uncover brazen police corruption.

Music

How Even an Old Hipster Can Age Gracefully

On their new albums, Leonard Cohen, Robert Plant, and Loudon Wainwright III show three ways.

How Tattoo Parlors Became the Barber Shops of Hipster Neighborhoods

This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century

Moneybox
Oct. 1 2014 8:34 AM This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century To undertake a massively ambitious energy project, you don’t need the government anymore.
Behold
Oct. 1 2014 6:59 PM EU’s Next Digital Honcho Says Celebs Who Keep Nude Photos in the Cloud Are “Stupid”
  News & Politics
Politics
Oct. 1 2014 7:26 PM Talking White Black people’s disdain for “proper English” and academic achievement is a myth.
  Business
Moneybox
Oct. 2 2014 9:19 AM Alibaba’s Founder on Why His Company Is Killing It in China
  Life
Outward
Oct. 2 2014 9:58 AM No Word Yet From the Supreme Court on Gay Marriage 
  Double X
The XX Factor
Oct. 1 2014 5:11 PM Celebrity Feminist Identification Has Reached Peak Meaninglessness
  Slate Plus
Behind the Scenes
Oct. 1 2014 3:24 PM Revelry (and Business) at Mohonk Photos and highlights from Slate’s annual retreat.
  Arts
Brow Beat
Oct. 2 2014 10:36 AM How Bad Will Adam Sandler’s Netflix Movies Be?
  Technology
Future Tense
Oct. 1 2014 6:59 PM EU’s Next Digital Commissioner Thinks Keeping Nude Celeb Photos in the Cloud Is “Stupid”
  Health & Science
Medical Examiner
Oct. 2 2014 9:49 AM In Medicine We Trust Should we worry that so many of the doctors treating Ebola in Africa are missionaries?
  Sports
Sports Nut
Oct. 1 2014 5:19 PM Bunt-a-Palooza! How bad was the Kansas City Royals’ bunt-all-the-time strategy in the American League wild-card game?