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Boss' New Deal Jolts Germany's Unions

Martin Viessmann defied tradition and negotiated directly with his own workers. Critics claim his audacity may help destroy the nation's vaunted labor system.


ALLENDORF, Germany — With his jovial manner and many contributions to life in this village of 5,000, Martin Viessmann just doesn't seem to cut it as Class Enemy No. 1.

His industrialist father and grandfather built and developed the furnace factory that employs about 3,500 people here and provided the heaters that warm most of their homes. Scion Martin has brought both bread and roses to town too, adorning Allendorf with the works of contemporary painters and sculptors and--probably more to the liking of the locals--offering his work force guaranteed jobs and a promise not to cut pay.

Viessmann even created about 170 jobs last year, at a time when the nation's unemployment rate was--as it still is--pushing 12% and job creation had moved to where it remains, at the top of everyone's political agenda.

All that sounds good, particularly in an age when other German industrialists are fleeing their high-cost homeland and taking their manufacturing jobs with them.

So why do German unions and social critics paint Martin Viessmann as an unreconstructed capitalist pig? Why do they rail that he is destroying the vaunted labor-relations system that ensured labor peace and prosperity for decades?

Because Viessmann had the audacity to strike a deal directly with his own, mostly nonunion work force instead of accepting the terms negotiated at the regional level by the metalworkers union. And his approach is attracting imitators in corporate Germany.

This might not sound like much of a departure in America, where just 14.5% of employees are unionized and managers can pay pretty much what the labor market will bear.

But it ranks as an act of savage daring--and perhaps illegality--in the German context. Here, 30% of employees are unionized, and even those who aren't expect to be paid union scale or better.

IG Metall, Germany's powerful metalworkers union, has taken Viessmann to court. Industries across the country are watching for the final outcome, expected this month.

"Our company's labor model is unique in Germany," Viessmann says in an interview at his art-studded headquarters here in rural central Germany, an hour's drive from the nearest rail junction. "You won't find anybody else doing exactly the same thing we are, and that's why the union took us to court."

In Germany, unions have the statutory power to negotiate contracts for entire regions, setting pay, work hours and benefits for their sectors of the economy. The contracts have the force of law, and managements have willingly gone along, understanding that the extra cost buys them labor peace.

"Our social system puts the stress on 'social,' " says Wolfgang Boeckly, director of human resources for Bayer, the German pharmaceutical giant. "Maybe it costs a bit more, but that's the price we pay for social harmony."

In Germany, it should be noted, the street-fighting days of the 1930s and the fascist disaster they engendered are living memories, and there is near-zero tolerance for social conflict.

Factory Committees

Unions here don't have much direct contact with individual factories. That job is left to another layer of organized labor: the factory committees. These are small, elected bodies in every plant, made up of specially trained blue-collar men and women who have full access to company financial data. They can't negotiate basic benefits or call strikes, but they enjoy an ample share of power in company decision-making, on everything from marketing plans to corporate spinoffs.

This two-tiered system, distributing the clout of organized labor between the big unions and the small factory committees, is key to the much-envied German economic model and is often credited with giving the nation one of the lowest strike rates in Europe.

"Many conflicts which in other countries lead to strikes are resolved here by co-determination," says Ulrich Zachert, a professor of comparative labor law at Hamburg University. "There is a culture here of day-to-day dialogue at the plant level."

But however fond Germans may be of their "consensus" model, it's hard to find anyone who thinks it works well anymore. Unemployment here, already at its highest rate since the 1930s, is expected to rise further this year. New business investment is vital--it would create jobs--but executives say they won't pump more money into plants and equipment because labor costs are the world's highest.

And at 35 hours, they add, the German workweek is already the shortest in the industrialized world.

For several years, management has been arguing that the nation's economic problems would be solved if only there was greater labor flexibility--if key workplace decisions weren't rigidly fixed by the unions at the regional level and if, instead, bosses could hire and fire, set wages and design the workweek according to the circumstances of their own plants.

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