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VW's 4-day week saves 30,000 jobs in Germany

THE BALTIMORE SUN

WOLFSBURG, Germany -- The first year of the four-day work week is drawing to a close in the city that Volkswagen built, and assembly line worker Wilfried Kraak has decided that the experiment is a success, despite pay cuts as hefty as one-fifth.

"I would say that 90 percent of the people are satisfied," Mr. Kraak said of his 50,000 co-workers, half of VW's employees in Germany. "Before, with the extra pay, it was possible to buy more things, and this money is not there anymore.

"But I have each Friday off," he said. "I wouldn't go back to full time. I don't need that."

Mr. Kraak's assessment, shared to varying degrees by most co-workers, could be promising news for companies looking to avoid layoffs while still cutting labor costs. With a company as large as Volkswagen to lead the way, one might even think the four-day week could become the next step in workplace policy.

But few other large companies have shown enthusiasm for the concept, and some economists and labor analysts say it could even damage the economy -- by dampening consumer spending and keeping production costs higher than they might be.

The VW experiment may say more about Germany's lack of industrial competitiveness than it does about the future of labor relations. After decades of ever more generous labor agreements in Germany -- as exemplified by VW's well-paid workers -- it took the strong medicine of the four-day work week to knock VW's labor costs down to size.

And even this may not be enough, some economists say, because the very things that make the VW plan attractive to workers -- cutting hours and pay without sacrificing health insurance or other benefits -- make it unattractive for a company's bottom line.

Volkswagen officials beg to differ, especially when they consider their other choice: 30,000 layoffs. They argue that the four-day week has been a success for VW -- not only by lowering costs and protecting jobs, but by providing intangible benefits such as more management flexibility and better workplace morale.

The VW plan would have been unheard of for either management or labor before the auto industry entered a slump in 1992. By the end of 1993, the company was pondering layoffs for nearly one-third of its German work force.

"So it came about in a very short time that both sides broke taboos," said union leader Hans-Juergen Uhl, a member of the Wolfsburg plant's Works Council.

The German public watched in amazement as IG Metall, a union with a history of getting its way no matter how steep the demand, agreed to a pay cut. In exchange for flexibility, the union saved all 30,000 jobs and got shorter working hours -- a 28.8-hour week.

In return, the company got the lower costs it needed to put German operations back in the black. Thanks to the labor agreement and other measures, VW figures this year to save about $1 billion on its German operations, about $600 for each car built in the country.

The company also won more flexibility in setting shifts. Although it is called a four-day week, only about half the workers get a Monday-through-Thursday schedule like Mr. Kraak's. Others still work Monday through Friday but on shorter shifts (the early shift now begins at 7 a.m. instead of 5:30 a.m., for example). Still others work five-day weeks for three weeks, then take every fourth week off.

Workers didn't get a choice of options, and the company's selections haven't made everyone happy. At first, there was plenty of grumbling. And there were adjustments to make, such as new bus schedules and worse morning traffic jams.

"The discussions among people were pretty critical," Mr. Kraak said. "There were comments like, 'Cut the work of the people from two-incomefamilies instead.' They were hard weeks because nobody was sure what would happen."

"Sure there was insecurity," said Joerg Ahrenberg, another VW worker. "There were questions about standard of living, whether you could still take a good vacation. And people worried, 'How will the company go on? Will the jobs really be saved?'

"But then I saw that it wasn't too tragic, that I just had to count my money a bit more, that maybe I wasn't able to buy as big a motorcycle as I might want."

But not everyone has found it easy adjusting to less pay.

"The people who have bought houses have problems," Mr. Kraak said.

Loan officials at local banks report no increase in foreclosures or defaults. And even a slight slide into indebtedness is preferable to the avalanche that would have resulted from layoffs, particularly at the Wolfsburg plant. Its 50,000 workers make up roughly half the local population.

Yet, the early results of VW's experiment don't seem to be persuading other companies to follow.

Germany's other big automakers are proceeding with their job-cutting plans -- more than 100,000 layoffs are expected by the end of the three years beginning last January.

Deutsche Bank Chairman Norbert Walker seemed to speak for much of the rest of German big business when he said earlier this year, "The four-day week is rubbish."

Nor has any U.S. company asked to look at the results, VW officials say. Part of the reason is probably found in the explanations of the economists: The plan doesn't cut costs enough, since the short-week workers still get full-week benefits.

That runs counter to the trend of some U.S. companies, which have continued to lay off workers even after moving back into profitability.

But other countries have shown an interest. France already offers the incentive of lower taxes to companies that adopt shorter work weeks to save jobs. Japanese firms have quizzed VW officials about the concept. So have labor officials from Canada and South Africa.

The policy is not necessarily permanent, even at VW. The company originally planned to try it for two years, but already it seems that the experiment will be extended.

"We have to go on this way," said Ulrich Dase, a company executive. "We have made a lot of progress. We are in the black again."

When VW employees consider the alternative to the shorter week -- 30,000 layoffs -- their quibbles with the experiment lessen.

"Because the company has solved this crisis, it makes me want to stay here," Mr. Kraak said. "This impressed me."

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