This Union Leader Cuts Germany's Bosses Some Slack

In 1999, things were looking iffy at Wacker-Chemie, a Munich chemical company. A unit that manufactured high-purity silicon wafers was losing tens of millions of dollars in the face of a slump in demand. And workers at a wafer plant in the city of Burghausen were in danger of losing their jobs.

Relief came from an unlikely place: the labor union. Under the terms of an industrywide labor contract, Wacker was allowed to cut employee pay and adjust working hours to save money. Within a year, the unit was back in the black without a single layoff. And salaries were restored to prior levels. As one worker said at the time, taking a shorter vacation was better than getting fired.

This is the kind of labor flexibility that German business has been begging for. It exists in at least one industry, thanks largely to Hubertus Schmoldt, president of the Hanover-based union that represents 600,000 chemical workers, as well as miners and workers in the energy industry. While other labor leaders still speak the language of class warfare, Schmoldt, 56, is a pragmatist who realizes that German workers--among the highest-paid in the world--have to respond to global competition. "We're ready to think about how that can be solved," he says.

WIDER OPTIONS. That attitude is revolutionary in Germany, where job-protection laws make layoffs more difficult and costly than in Britain or the U.S. Schmoldt is hardly in favor of dismantling Germany's social protections. But he is ready to compromise. As a result, German chemical makers have far more options than other unionized industries when times are tough. Companies, in consultation with workers, can cut pay by as much as 10% for a year, eliminate Christmas bonuses, and adjust the workweek between 35 and 40 hours, paying only for time worked. About 5% of the industry makes use of such provisions each year, according to the Federal Association of Chemical Employers. "There are many, many cases where a chemical company has stayed in Germany or invested here because of the special flexibility we have," says the association's executive director, Hans Paul Frey.

Schmoldt is poised to play a crucial role when most of Germany's big unions go to the bargaining table next year. Some are making it clear they expect to be rewarded for several years of restraint on wage demands. Schmoldt's union, known by its German initials of IG BCE, won't formulate its bargaining stance until after a lengthy consultation process with members. But if the past is any guide, Schmoldt will likely place job preservation ahead of pay hikes. He also wants the government to move faster on other reforms, such as simplifying the tax code, in the belief that this will encourage German companies to create new jobs at home. "We can't hinder the internationalization process," he says. "We can only try to shape it." Indications are that he is doing just that.

By Jack Ewing in Hanover

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