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Germany's New Reality

Layoffs by Automaker Confirm Labor's Diminishing Power

By Peter S. Goodman and Petra Krischok
Washington Post Foreign Service
Friday, December 10, 2004; Page E01

BOCHUM, Germany, Dec. 9 -- During much of Germany's postwar economic boom, as prosperity mounted and car sales multiplied, workers at the Opel automobile factory here became accustomed to getting their way: six weeks of vacation, a 35-hour week and some of the highest factory wages on earth. Whatever was left of that era ended on Thursday.

Undercut by vastly cheaper labor in neighboring Poland and by increasing global competition, the union at Adam Opel AG acceded to a plan by General Motors Corp. to cut 12,000 jobs throughout Europe -- 10,000 of them in Germany and an estimated 4,000 at the Bochum plant alone. The job reductions will be voluntary, and GM, which owns the Opel, Saab and Vauxhall brands, is offering buyouts, early retirement and retraining worth hundreds of thousands of dollars for the most senior workers.

Hans Gabriel, a worker at the Opel automobile factory in Bochum, Germany, joined fellow employees in a five-day strike in October. (Michael Sohn -- AP)

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Though geared to help GM rebound from its global slide in the auto market -- the company has not been profitable in Europe since 1999 and expects to save $665 million a year through the jobs cuts -- the deal underscores the extent to which globalization has torn at the social consensus governing Germany and much of Western Europe.

Rigid labor rules are blamed for European unemployment rates stuck around 9 percent, compared with less than 6 percent in the United States. Economic growth has also lagged, and labor-market reform is cited by many economists as an important step toward changing that.

When Opel workers went on strike for five days in October, it was clear how times were changing. They went back to work with nothing more than the promise of talks and the lingering threat that many of the Bochum plant's 9,600 jobs would be shifted to Poland, where labor costs about $4.70 an hour, compared with $29 an hour here.

"It's not negotiations, what's happening now," said Peter Jaszczyk, who worked at the Opel plant for 40 years and formerly headed the worker's council. "Management is just dictating conditions. The union doesn't have the power anymore."

Around the world, labor is grappling with the impact of capital flowing to lower-cost countries. Textile workers in Mexico are losing ground to China; software engineers in the Silicon Valley succumb to skilled counterparts in India. The changes in Western Europe have been particularly wrenching because labor has occupied such a powerful perch for much of modern times -- one that has, until recently, cushioned against the restructuring and layoffs that have occurred elsewhere.

Now, labor in Europe's wealthiest countries is reeling as capital flows eastward. Investment is pouring in to new members of the European Union such as Hungary, Poland and the Czech Republic, where workers earn roughly one-sixth what they do in Germany and France, and farther away to still cheaper Romania, Turkey and China. Unions once accustomed to wage increases and sweetened bonuses submit to slashed pay and benefits in a desperate bid to keep jobs.

In Germany -- still struggling to integrate its wealthier western half with the formerly communist east -- the export of jobs is exacerbating an unemployment crisis. More than 4 million people are out of work, and unemployment is 10 percent.

A recent survey conducted by the economist Horst Wildemann found that 6 in 10 German companies were preparing to establish a manufacturing base outside the country in the next four years. That could cost as many as 400,000 jobs a year. A similar study by the Boston Consulting Group found that transfers of work abroad could eliminate one-fourth of Germany's industrial workforce by 2015, wiping out 2 million jobs.

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