Volkswagen Tries to Bring Germany’s Worker-Friendly Policies

The Washington Times

September 3, 2014

Copyright 2014 The Washington Times LLC All Rights Reserved

German manufacturers are trying to bring worker-friendly policies, which have helped make Germany into an export powerhouse and could help the United States solve its youth joblessness problem, to their U.S. operations, but so far few American businesses have seized on the tips they are offering.

Volkswagen (VW), Germany's largest automaker and the second-largest car manufacturer worldwide behind Toyota, just started an innovative program to train workers with the exacting and advanced skills needed to make the Passats assembled in the company's massive, state-of-the-art plant here, eliminating a problem with scarce skilled labor that many American manufacturers say plagues their factories and keeps them from expanding.

But despite the success experienced by VW, BMW and other German businesses with such apprenticeship programs both here and abroad, U.S. businesses have done little to replicate the worker-friendly programs. A few American businesses, like Caterpillar, are setting up programs to train and funnel idled workers into their factories, but for the most part, the U.S. business strategy has been to complain a lot and lobby for aid from Washington and state legislatures to "do something" about the estimated 600,000 to 3 million skilled manufacturing and technology positions that currently go begging.

"Among businesses, the issue of finding properly skilled labor is their top challenge. There seems to be a gap between high school and college" that is not being filled in the U.S., said Hermann Nehls, a counselor for labor at the German Embassy. While millions of workers cannot find jobs because they lack the skills, employers cannot find the skilled workers that they need to run their shops and factories. Meanwhile, political leaders talk about creating more jobs and reviving the economy but rarely seem to find solutions that work.

Germany has found that "economic success largely depends on the skills and expertise of our citizens" and has cultivated a system that ensures a steady flow of trained workers to fill the needs of German industry, Mr. Nehls said. "Volkswagen is trying to raise this kind of apprenticeship in the U.S."

Stefanie Jehlitschka, vice president of the German American Chamber of Commerce, said that while German businesses like VW are relative newcomers to the U.S., they quickly realized that state-of-the-art training programs for their staff were rare or nonexistent in most areas. In Germany, businesses work with the government, universities and labor unions to provide worker training in a systematic way, but in the U.S. businesses must fund any training programs themselves, and the political and community network for supporting the programs is patchy, she said.

"The biggest challenge we see is the private and public sectors are not talking in the U.S.," she said. "Companies have never gotten involved in the educational system, and there are few or no collaborations."

Tennessee's political leaders got involved helping VW connect with local community colleges that could help train young people to work in its highly automated factory while workers gained on-the-job experience. The payoff: VW is bringing its cutting-edge German manufacturing culture to Tennessee, including a devotion to protecting the environment as well as cultivating good worker relations.

Rep. Charles J. "Chuck" Fleischmann, Tennessee Republican, whose district includes the VW plant, said he's found other members of Congress take a great interest in what VW is doing here as it has enabled the Chattanooga area to create good-paying middle-class jobs while they remain scarce elsewhere around the nation.

"There is a wow factor. It's the envy of the country," he said. "This is a model for the country, a model for the world. This is a model that can make America great in manufacturing again."

Pushing the envelope

VW is pushing the envelope more than most other German businesses in attempting to bring worker-friendly policies to the U.S., and it has not always met with political praise. The company works effectively with unions at home and in dozens of countries around the world, but it learned the hard way earlier this year that any attempt to allow its U.S. workers to organize into a union that could formally provide advice and represent workers' interests in the company's in-house governing council will run into a buzz saw of opposition in a traditional right-to-work state hostile to unions.

In a closely watched vote, U.S. business and conservative groups allied with Republican political leaders in Tennessee joined forces to lobby successfully against a union-organizing effort at VW's plant here in February. Tennessee Gov. Bill Haslam even threatened to withdraw state tax subsidies from the company if the union vote succeeded. While VW had the most at stake in the election, it was officially neutral and did not fight the United Auto Workers organizing effort. Executives privately seemed open and even eager to work with a union-backed workers' council similar to the ones in their German plants.

The harsh battle over the election to create the first unionized plant in a Southern right-to-work state was defeated on a 712-626 vote. It left jangled nerves throughout the community, and VW is still fumbling for ways to more formally bring its workers into its decision-making process so as to make better products that can compete in the tough global marketplace for cars.

"VW wanted the union. They still want the union," although VW executives vehemently deny they took sides, said Edward Kline, a Chattanooga airport employee with friends who work at the VW plant. He feels the workers got cheated out of the better wages and benefits that come with unionization. With cars churned out of the plant selling for $31,000 apiece, the company could well afford to pay the higher wages seen in unionized plants, he said.

While American manufacturers struggle to compete globally and continue to move jobs to poorer countries, VW, Mercedes-Benz, BMW and other German manufacturers say they're able to pay their workers high wages because they focus on making their products the best and most sought after in the world. German-manufactured products from cars to music systems are revered worldwide today for their high quality and perfection of detail—characteristics for which consumers are willing to pay a premium price.

The benefits of cooperation

German manufacturers point to their system of labor-management cooperation as an asset, not a liability, which has helped them turn the country into one of the world's most formidable advanced manufacturing machines and the most successful exporter among developed countries.

"It's in our DNA" to work with employees on a harmonious basis and "row in the same direction," said a VW executive, explaining why the company braved the controversy over the union election. Another union vote is possible next year. German companies realize their workers are on the front lines of the manufacturing process and can make valuable suggestions that have the potential to improve VW products and further the company's global ambitions.

Analysts point out that it was worker cooperation that enabled German manufacturers to keep a lid on wages and dramatically improve productivity at a critical juncture when the German economy was struggling with the reunification between the East and West two decades ago. Disciplined cooperation between workers and management enabled Germany to negotiate the economic difficulties and emerge as the healthiest economy in Europe—now the envy of the rest of the continent and much of the world as other countries struggle with epic debt and economic problems.

VW seeks to instill a "passion for detail," cooperation and other values characteristic of the German system in its employees here in Tennessee, the official said. It invites employees into its "team," makes available a chic uniform of smartly casual work clothing that even the executives wear on the plant premises and encourages workers to "think blue"—that is, dream up new ways to improve the company and its products.

VW's efforts seem to be paying off: The carmaker not only is expanding in the U.S. with the start of a new line of SUVs here in Tennessee in 2016, but it is the most successful Western manufacturer in the world's largest car market today—China—and has ambitions to surpass Toyota and become the No. 1 carmaker worldwide by 2018. Meanwhile, Detroit's carmakers have presided over a diminishing share of the U.S. market and lag behind their German competitors in most other countries overseas.

The lure of a job

Unlike the defeated drive for unionization here earlier this year, VW's newly inaugurated apprenticeship program has met no political opposition and stands a good chance of becoming a model for other U.S.-based businesses. VW has teamed up with Chattanooga State and other local community colleges to put together three-year programs that lead to technical engineering degrees and guaranteed jobs in VW plants.

Program graduates—13 of whom marched down the aisle to the strains of "Pomp and Circumstance" here earlier this month to collect their VW engineering certificates—can work at the plant here or at any of 106 other places in the world at a starting salary of about $44,000 a year, with generous medical and other benefits.

While most American high school graduates pay $20,000 to $40,000 a year to earn a bachelor's degree that no longer guarantees them a job when they graduate from college, VW's apprentices earn $10 to $11 an hour as they attend classes and work part-time in the assembly plant, learning skills in electronics, mechanics, robotics, computer programming and other areas before they launch into guaranteed full-time jobs.

Although the millennial generation is the most debt-scarred and job-poor in decades, the money VW apprentices earn helps them pay their community college tuition and fees. Most classes are conducted in VW's pristine, light-filled classrooms adjacent to its spotlessly clean and airy factory.

In Germany, the manufacturers, unions and government share the expense of running apprenticeship programs - a clear dividend in a system where parties have chosen to cooperate rather than fight. Analysts say U.S. businesses have balked at the cost of setting up such programs on their own. Were more American businesses able to share the expense, more might be willing to establish apprenticeship programs.

Germany's programs are perhaps the most comprehensive worldwide, although countries from Australia and Great Britain to Canada and Switzerland have some sort of apprentice system. In Germany, schooling is available for over 300 professions, ranging from nursing and secretarial work to manufacturing and construction. And a majority of Germans have completed such programs.

Rising interest

Interest among U.S. businesses definitely is picking up. Applications for Mr. Obama's apprenticeship grants, which will be awarded in the fall, have been booming, said Garfield Garner, regional director at the U.S. Department of Labor's Apprenticeship Office. And a few globally renowned corporations like Caterpillar are experimenting with starting their own apprenticeship programs.

U.S. businesses that have given it a try are usually impressed with the results.

"When you graduate from the apprentice school, you're going to make more than $50,000 a year, you're going to have a job, you're going to understand the culture of your business—and you have no college loans," said Mike Petters, president of Huntington Ingalls Industries. "I encourage every business leader I talk to if you're not engaged in the workforce development pipeline through your community colleges, you won't be happy with the product you get out of it. But if you are engaged in it and think of it as an investment, then the return is really high."

Mr. Garner said U.S. businesses are increasingly finding that apprenticeships are "absolutely the best kind of training in the world." Still, the number of apprenticeships in the U.S. would have to increase by sixteenfold to equal Germany's level of attainment.

As helpful as apprenticeships would be in addressing today's youth unemployment problem, with the technological sophistication of factory jobs growing by leaps and bounds each year, the Obama administration says apprenticeships will be needed even more in the future to address a shortage of skilled workers. The McKinsey Global Institute has estimated the shortfall could reach 1.6 million by 2020. Other associations estimate that the skills shortage is already in the millions today.

Programs set up by employers themselves are superior to the multitude of job-training programs available through the states and federal government, mainly because there's a guaranteed job at the end of the training, Mr. Garner said.

More general job training programs can be notoriously ineffective at helping people find jobs once they complete training, but 87% of apprentices land jobs after they finish their training, and they earn an average starting salary of $50,000 in the U.S., studies show. Graduates also can earn as much as $300,000 more over their lifetime than their untrained peers.

Moreover, apprenticeships in the U.S., which once were available only in construction trades, today are available in 1,000 different occupations. But because there are relatively few slots, the programs are difficult to get into, Mr. Garner said. Applicants at the VW plant must have a high school degree, possess college-level reading, writing and mathematical skills and pass a VW assessment test and interview to get in.

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