It's time to get real. On the eve of the 21st century, mighty Volkswagen still resembles a quirky, 1960s-style, state enterprise. VW's largest shareholder, the state of Lower Saxony, in concert with the union, exploits the company as a de facto employment agency. A 38-year-old federal "VW law" ensures the state's control. VW has even become a pawn in the Sept. 27 election--in which Lower Saxony's Social Democratic premier, Gerhard Schroder, is challenging Chancellor Helmut Kohl.
Schroder, who styles himself a German Tony Blair, has a chance with VW to show that he has abandoned his party's old-style politics. At the least, he should remove Lower Saxony's two representatives--of which he is one--from VW's 20-member supervisory board. That would restore the 50-50 balance of power between labor and capital that is typical at German companies. But Schroder should take an even bolder and more important step: unload the state's 19.5% stake in the company.
RACE IS ON. VW is an anachronism in today's Germany, where the state is moving rapidly to get out of business. Even the post office, the epitome of a government enterprise, will soon be up for sale. Setting VW free would send a message that, regardless of which party is in charge, there's no turning back. It would also strengthen VW for the coming global car wars. The race is on to be one of the companies that will dominate the world's $750 billion auto industry. Determined to be in that club, VW Chief Executive Ferdinand Piech is making acquisitions pell-mell. But too many workers will hold VW back. "Size isn't enough," says Garel Rhys of Cardiff Business School in Wales. "You have to be efficient."
That's a tall order when one of the main goals of the company's largest shareholder and union leaders is to boost employment. You end up with the predicament VW faces today. With Europe's economies humming, VW's slick new models, such as the redesigned Golf, are sellouts. Europewide, the company has 350,000 outstanding orders. Buyers must wait up to six months for some cars. VW is losing sales as impatient customers defect to competitors.
VW workers are hustling to turn out as many cars as possible, right? Well, some are. But thanks to a 1994 contract designed to save 30,000 superfluous jobs, the average VW worker toils only 33 hours a week. That's less than the normal 35-hour week for German manufacturing workers and below the 40-hour weeks, including overtime, at Daimler Benz. A longer workweek is the answer. But VW must overcome union opposition to add production on Saturdays, when plants are typically idle. The company is now hiring new workers even though its Wolfsburg plant is a perennial loser in productivity surveys.
THEME PARK. There's more. VW recently unveiled a plan, dubbed AutoVision, to create up to 11,000 jobs and halve Wolfsburg's 15% unemployment rate by 2003. VW has pledged $390 million to build a theme park called Auto City aimed at attracting 1.5 million visitors a year. The timing of the AutoVision announcement, just two months before the election, raised eyebrows. Members of Kohl's Christian Democratic Union charged it was a stunt designed to gain votes for Schroder. The company and Schroder's office say the occasion, the 60th anniversary of VW's founding on July 11, was purely coincidental. Not so coincidental was Kohl's decision to leave the 1960 law ensuring the state's grip on VW intact. Wary of giving Schroder campaign ammo, Kohl's party didn't touch the provision during a rewrite last year when it removed similar limitations for other companies.
Such crazy gyrations are largely ignored in a nation grown accustomed to VW's role as a quasigovernment employer. But it's high time for Lower Saxony to get out of the automobile business. In the long run that will strengthen VW--and Germany.