Germany Explodes Republican Myth

[kpete]

How Germany Builds Twice as Many Cars as the U.S. While Paying Its Workers Twice as Much

In 2010, Germany produced more than 5.5 million automobiles; the U.S produced 2.7 million. At the same time, the average auto worker in Germany made $67.14 per hour in salary in benefits; the average one in the U.S. made $33.77 per hour. Yet Germany’s big three car companies—BMW, Daimler (Mercedes-Benz), and Volkswagen—are very profitable.

How can that be? The question is explored in a new article from Remapping Debate, a public policy e-journal. Its author, Kevin C. Brown, writes that “the salient difference is that, in Germany, the automakers operate within an environment that precludes a race to the bottom; in the U.S., they operate within an environment that encourages such a race.”

There are “two overlapping sets of institutions” in Germany that guarantee high wages and good working conditions for autoworkers. The first is IG Metall, the country’s equivalent of the United Automobile Workers. Virtually all Germany’s car workers are members, and though they have the right to strike, they “hardly use it, because there is an elaborate system of conflict resolution that regularly is used to come to some sort of compromise that is acceptable to all parties,” according to Horst Mund, an IG Metall executive. The second institution is the German constitution, which allows for “works councils” in every factory, where management and employees work together on matters like shop floor conditions and work life. Mund says this guarantees cooperation, “where you don’t always wear your management pin or your union pin.”

Mund points out that this goes

against all mainstream wisdom of the neo-liberals. We have strong unions, we have strong social security systems, we have high wages. So, if I believed what the neo-liberals are arguing, we would have to be bankrupt, but apparently this is not the case. Despite high wages . . . despite our possibility to influence companies, the economy is working well in Germany.

http://www.forbes.com/sites/frederickallen/2011/12/21/germany-builds-twice-as-many-cars-as-the-u-s-while-paying-its-auto-workers-twice-as-much/
http://www.dailykos.com/story/2011/12/22/1047995/-Germany-Explodes-Republican-Myth?via=siderec

[stillwaiting]

1. Very good read. Thanks for posting. nt

[freshwest]

33. +1 and have shared elsewhere.

[The Genealogist]

2. How much of these automakers' financial profitability comes from bringing jobs to the US

where the workers, as the Forbes link pointed out, are starting at $14.50 and going up to $19.50 after three years?

[LiberalAndProud]

19. Am I misunderstanding this factoid?

In 2010, Germany produced more than 5.5 million automobiles; the U.S produced 2.7 million.

"Germany produced" would indicate that the product was manufactured in Germany, wouldn't it?

[The Genealogist]

37. I was talking about their profits

not the number of cars they produced in Germany.

[LiberalAndProud]

39. So you suspect that German workers are doing well on the backs of U.S. autoworkers.

Would that be a clear understanding? That is an interesting thought. Third world status. Shoe on the other foot doesn't feel so good.

[DissedByBush]

42. Not just the US

German car companies have been shipping jobs all over Europe. There was one VW plant in East Germany that was losing money, and the basic deal was they were going to move the plant to low-wage Eastern Europe, or the workers would have to take a work hour cut. The workers took the cut. Nevertheless, VW does manufacture their cars in many places outside of Germany, especially the low-end ones (Brazil, Slovakia and India are favorite locations).

VW has also been buying foreign car brands to increase profitability, especially in the low-end market. They own Seat in Spain (manufactured in Spain, Belgium, Portugal and Slovakia) and Skoda in the Czech Republic (manufactured in Czech Republic, China, India, Kazakhstan, Russia, Slovakia, and Ukraine). These brands, as well as Volkswagen and Audi and even Porsche, have a vast sharing of minor and major components made in the various countries.

Interesting that this article doesn't include Opel, the German subsidiary of General Motors, which is a major manufacturer in Germany. But of course their cars share components and manufacturing locations with the various other GM subsidiaries around the world.

My personal addition: I've known people who worked for Opel and Mercedes, and they liked it. Decent pay, great work environment, great benefits.

[Laelth]

3. k&r for labor and for the truth. n/t

-Laelth

[underpants]

4. +

kicking for later read

[Fool Count]

5. Except that in 2010 US produced nearly 7.8 million automobiles, not 2.7 million

(http://en.wikipedia.org/wiki/Automotive_industry_in_the_United_States).
So the numbers are off by over a factor of three. If they got that basic fact so wrong,
I am reluctant to trust the rest of their numbers and analysis.

[dems_rightnow]

7. You are correct

Interestingly, this place cites the 2.7 million figure.
http://www.nationmaster.com/graph/ind_car_pro-industry-car-production

But they cite their source as the International Organization of Motor Vehicle Manufacturers, and link to them. But they show the 7.8 million figure. Odd.
http://oica.net/category/production-statistics/

Regardless, it's clear that the 2.7 million number is just wrong. Very wrong.

[provis99]

9. your OCIA source says 2.7 million cars, same as the OP.

obviously, you are confusing cars with commercial vehicles like Caterpillars, etc.

[progressoid]

10. Perhaps it's cars vs commercial vehicles.

In this link http://oica.net/category/production-statistics/ the 7.8 million includes 5 million commercial vehicles.

The figure for just cars is 2.7 million for the US and 5.5 million for Germany.

[provis99]

8. that wikipedia article doesn't cite any sources.

And I would take an industry magazines figures over wrongapedia.

[Fearless]

11. It wasn't wrong, but misread. n/t

[kristopher]

24. "cars" not "automobiles"....?

We like our trucks.

Go to top of nationmaster site and switch fm cars to motor vehicles.

12M

[Fool Count]

27. This nationmaster site is a big pile of crap.

According to them in 2010 China made almost 14 million "cars", but only 3.2 million "motor vehicles".
They must count horse- and pedal-driven buggies and railway carriages under "cars" or, more likely,
just pulled all those numbers out of their asses.

Besides, the first sentence of the original article mentions "automobiles" which in any conventional
understanding includes both cars proper and light trucks.

[econoclast]

40. Figures from the GERMAN Auto Manufacturers Association

http://www.vda.de/en/zahlen/jahreszahlen/automobilproduktion/


6. World Automotive Production
6.1 Passenger cars

Germany 2009 : 4,964,523 ----- 2010 : 5,552,409
USA 2009 : 5,577,148 ----- 2010 : 7,587,332


FOOTNOTE ... these figures include passenger cars and light trucks.


Commercial vehicles are in a separate chart


My note. GERMAN auto productino includes FORD WERK ( Ford's German operations ) and OPEL ( GM's German oerations ) as well as BMW, Daimler & VW

Prior poster who commented that if the article has such basic information wrong ..... one has to wonder what else they are incorrect about.

[MADem]

44. Ouch--that is an enormous discrepancy. nt

[Turbineguy]

6. In the US top management likes a hierarchy

so they can extort huge pay packages by pretending only they can make good decisions. Then there are plenty of lower level managers who simply hate Unions for some undefined reason (like following orders from Fox News).

[Fearless]

12. Damn what I would do for $67/hour

[usrname]

43. The $67/hr

That's salary + benefits. Of course, since there's a national health coverage in Germany, the benefits don't have to include the rather substantial amount for health. The benefits include a very generous 1 month vacation during August/September.

Still better than the $34/hr salary + benefits.

[MADem]

45. Cost of living over there is no pic-a-nic, even with the health coverage.

I know people used to think that the UK wages were wonderful, until they saw the cost of rent and the prices in the shops. I can remember paying thirty bucks for a shitty little personal pizza and beverage in London at a Pizza Hut, something you'd get today for under ten in the USA.

[Fearless]

47. Pizza Hut smells like a tourist trap...

But at any rate, I mean 67 an hour despite prices, I would be well better off than I am now.

[MADem]

48. No more so than McDonald's, Kentucky Fried Chicken or

Burger King (with veggie and soy burgers for the non-beef eating crowd). It's woven into the landscape.

Hell, there's a McDonald's at the foot of the Spanish Steps in beautiful Roma. It may be convenient for tourists, but go in there--it's cheek by jowl with Romans having a fast lunch, too.

You'd be surprised at how much of a "big paycheck" can be eaten up by cost of living, taxes (VAT and income), and other expenditures.

[Fearless]

49. Well...

I would agree that those other places are equally tourist traps...

But as I have very poor health care, no dental or vision, no retirement (SS aside), two degrees worth of student loans, and zero advancement... So... anything better than $11 / hr looks pretty good right now.

[MADem]

50. I can understand.

It's just that, at a distance, sometimes a big paycheck looks better than it actually is.

I used to pay five bucks for a cup of coffee...nearly thirty years ago...in Japan. Sure, it was great coffee, served in a pretty cup in a nice atmosphere, but over a quarter of a century ago, that was a lot of money to pay for a doggone cuppa coffee! And--the exchange rate back then was WAY better than it is today!

[stevenleser]

13. K&R Love this!!!!

Thanks so much for posting. It is now on my Facebook page.

[Populist_Prole]

14. They have an actual industrial policy. A better model. I nail rabid cons I know with this.

They love to bash Europe, especially the French. It's freaking pathological. They know Germany has the strongest economy there, and makes great stuff, a lot of which they own....and I can tell it pisses them off due to the empirical evidence clashing with their US corporatist worldview. Always trying to save face by switching to the gun issue, or playing the socialist card. They don't seem to realize ( or at least they do, they just don't want to realize it ) that the labels ( capitalism/socialism ) don't mean shit. It's about the quality of life, and in any case, soshulist Germany is kicking capitalist USA's ass. When's the last time this place ran a trade surplus?

Spelling/grammatical/HTML edits.

[Lydia Leftcoast]

15. As are the socialist countries of Scandinavia

The only one doing poorly is Iceland, which allowed itself to become a casino for banksters.

[elehhhhna]

29. We had a choice int he past 20 years - compete w/ Europe or China/India

our overlords picked the latter

[Bozita]

16. Recommended bigtime!

Great post!

[Rochester]

17. K. & R.

Solidarity forever!

[pansypoo53219]

18. govt health coverage.

our system is to stupid + anti competitive.

[StarsInHerHair]

20. they also have apprenticeships-that PAY MONEY even, we should be more like Germany & Canada

with their superior health systems

[Edweird]

23. We have apprenticeships that pay you while you learn - but hard work isn't held in high regard

around here. Too many DU'ers will tell you (indirectly of course) how you deserve to poor if you actually *WORK* for your money. It's mind bending.

[Fumesucker]

21. I was just reading a post on a technical forum about this..

Scroll about halfway down the page for the article about German manufacturing.

http://www.cnccookbook.com/

<snip>

1. Focus on high quality products customers will pay extra for rather than cheap products. As Time says, the Chinese make chainsaws, but they don't make Stihl chainsaws. Likewise with Mercedes automobiles and many other products. When you build high quality products, the margins are higher and you can afford higher-priced employees. In addition, you're making products that are much harder to reproduce elsewhere.

2. Family-owned firms are committed to domestic production rather than outsourcing. German executives have been unusually focused on keeping jobs in Germany. It's not clear whether this is just a cultural tendency, or if there is more at work, but it certainly has been helpful to their economy. Part of it has to be that many German manufacturers are small and mid-sized family owned firms that have a greater commitment to their workers than corporate behemoths. This is especially impressive when you consider that labor costs in Germany are actually higher than they are in the US--it's an even greater burden to keep domestic workers than it would be for the US.

3. Subsidies rather than lay-offs with unemployment benefits. When the recession hit, the German government subsidized wages so companies could keep their valuable employees in place and productive rather than unemployed, on the dole, and looking for jobs. This enabled German firms to put the workers on projects that would yield dividends in the future, and to keep the worker's valuable skills and knowledge in house. Where lay-offs were still a problem, German companies went to reduced hours instead of lay-offs.

4. Successive German governments have been clear and consistent in their support for Manufacturing. Somehow the US government has always seemed to favor the Financial and Energy sectors more. The Germans have also had extremely strong ties between the University system and manufacturers.


<snip>

Read the rest of the piece at the link.

[AllyCat]

31. This, perhaps, deserves it's own post.

Interesting.

[Lunabelle]

22. K&R

Americans need to wake up.

[pampango]

25. "Germany ... an economic model with more bottom-up worker control than that of any other country..."

http://www.huntingtonnews.net/columns/100807-kinchen-columnsbookreview.html

In his latest book, "Were You Born on the Wrong Continent? How the European Model Can Help You Get a Life" (The New Press, 336 pages, $25.95) Geoghegan asks his readers if they really believe the propaganda that the U.S. is the greatest place to live on earth, balancing job security, health care, life expectancy and time off for good behavior to have some fun.

His conclusion, based on five trips where he tries to understand so-called European socialism firsthand, is that we're not the best place for middle-class people. First he tries France (which has become a rhetorical stand-in for the continent as a whole in many Americans' minds), but he eventually ventures into Germany to see what some call the "boring" Europe. He says the French model is flawed because workers don't have the advantages of Germans, with a say in the company's future, and are constantly striking. Germans, with their powerful unions, rarely go on strikes because they have a real voice in their employment.

In Germany, Geoghegan finds the true "other"—an economic model with more bottom-up worker control than that of any other country in the world — and argues that, while we have to take Germany’s problems seriously, we also have to look seriously at how much it has achieved. Social democracy may let us live nicer lives; it also may be the only way to be globally competitive. His anecdotal book helps us understand why the European model, contrary to popular neoliberal wisdom, may thrive well into the twenty-first century without compromising its citizens' ease of living — and be the best example for the United States to follow.

OK, some facts about Germany, the largest economy by far in the European Union and the fourth largest in the world, measured by gross domestic product per person (GDP), with a thriving export-oriented manufacturing sector -- like the kind we used to have when we manufactured goods that were desired around the world.

Germany, with 83 million people and few natural resources, is the world's second largest exporter, with $1.170 trillion exported in 2009. You know who is the largest exporter and it ain't us. Hint: It begins with C and ends in A. and has more than 1.3 billion residents. Germany's service sector contributes about 70 percent of the total GDP of Germany, with industry another 29.1 percent and agriculture less than 1 percent. Most of the country's exports are in engineering, automobiles, machinery, metals and chemicals. Germany is the world's leading producer of wind turbines and solar power technology.

Geoghegan tells us that the average number of paid vacation days in the U.S. is 13, compared with Germany’s 35. New mothers in the U.S. get three months of unpaid job-protected leave and only if they work for a company of 50 or more employees, while Germany mandates four months’ paid leave and will pay parents 67% of their salary to stay home for up to 14 months to care for a newborn. U.S. life expectancy is 50th in the world, compared to Germany’s 32nd.

[Jim Lane]

26. By coincidence, I was just reading Mitt Romney's "thoughts" on this subject

The son of the former head of American Motors should at least be able to say something sensible about automobiles, right?

Well, maybe not.

In Romneyland, foreign manufacturers have a "cost advantage" over American manufacturers of about $2,000 per vehicle. What are the sources of this difference? According to Romney, the three most important are:
1. The United Auto Workers (negotiated pension and health benefits for retirees).
2. The United Auto Workers again (negotiated wages and work rules).
3. The federal government's fuel economy standards.

This wisdom is dispensed at pages 117-18 of his book No Apology.

Pander much, Mitt?

[Starry Messenger]

28. k&r

[AllyCat]

30. This is fascinating. Bookmarked for reference later when talking to wing nuts

not that reason and facts will help.

[freshwest]

32. K & R

[hootinholler]

34. Approximately 5% unemployment rate even in the downturn

One other tidbit that flies in the face of trickle down worker suppression.

[abelenkpe]

35. K&R please read

Great article!

[Festivito]

36. But, we only pay 20-30% on less and they pay 50% in taxes on it all.

Which might sound good for a moment, until you add the benefits to our taxes and then recalculate the percent we pay.

That's when we realize we pay more taxes than they do and we get less coverage.

Next we stick our fingers in our ears and yell: la-la-la-la-la-la-la-la.

[a2liberal]

38. K&R (n/t)

[limpyhobbler]

41. They can afford to pay people better in Germany because their CEO's and other 1% don't take as much.

Income disparity is greater in the USA. Also our companies have to pay for health insurance plans. I think in Germany they don't do that. is that right? not sure.

[JDPriestly]

46. I did an in-depth study of free speech rights and of employee's rights of representation

in Germany some years ago for a course I was taking.

And we think we are free? Ha!

At least at that time, based on the case law and statutes I read, a German employee could not be fired for statements that his boss did not like about politics (as long as they were not pro-NAZI or extreme). One case involved a young apprentice who had publicly opposed nuclear energy. I believe he had been fired, not sure about that. The court said that his employer could not fire him for his exercise of his free speech right. (It has been a long time, so I could not swear that I have every fact right. But you get the import.)

That is because, in Germany, the obligation to respect free speech rights and certain other rights applied to everyone, not just the government.

Wish that our laws were more like those of Germany. They are way ahead of us on that.

And the laws that the OP refers to are the outgrowth of the same underlying values as German laws on free speech.

[xchrom]

51. du rec. nt

[krispos42]

52. K&R