Off The Dole -- And On The Assembly Line

Heike Müller, a 37-year-old mechanic, embodies what seems to be going right in eastern Germany. After the Berlin Wall fell in 1989 and Germany was unified a year later, Müller lost her job at a chemical company. Since then, she has gotten by with make-work schemes and retraining programs. Then, in 2001, BMW decided to build a manufacturing plant in Leipzig, and Müller's life changed. She completed an orientation program, then began commuting to Munich to train at BMW's plant there for the 2005 opening of the Leipzig factory. The new plant will manufacture BMW's 3-Series limousines. "Now I am the head of the windshield mounting unit," she says with pride. "I was really fed up with being unemployed."

Müller's story shows what can be accomplished when companies work with the government and unions to turn things around. BMW had some enticing incentives to locate its plant in Leipzig. The European Commission classifies the city as a structurally weak region, which allows the local government to subsidize as much as 30.1% of corporate investment once the plant is completed. BMW plans to invest up to $1.59 billion in the new auto plant, but final costs could be higher. That means the Munich auto maker could end up getting a payment of as much as $500 million from the government of Saxony. Another attraction is Leipzig's location in the middle of east Germany's auto belt, which will allow BMW to benefit from a concentration of skilled labor and suppliers.

When BMW began investing in Leipzig in 2002, few of its new hires came from the ranks of the unemployed. Most were skilled workers hired from small and medium-size companies in the region. But because there were so many jobless workers in Leipzig, city officials and BMW executives sat down and came up with a plan, which they dubbed "Pole Position," because the program aimed to improve qualifications for the jobless, putting them in a better position to compete with employed applicants for jobs at the plant. "In the beginning our management was very skeptical," says Rudolf Reichenauer, personnel chief for BMW's Leipzig plant. "But we were pleasantly surprised." Reichenauer says those hired from the jobless ranks often were highly motivated, flexible, and able to take on responsibility.

Working with a city-owned employment agency called Pool, BMW started sifting through lists of jobless workers in Leipzig and the surrounding region. It asked those with the best skills and most motivation to take a written test. Those who passed, such as Müller, were invited to participate in a training program that requires commuting to a BMW plant in Regensburg, in northern Bavaria, for six weeks. After that, the best performers are trained for their work in Leipzig at a BMW plant in Munich. BMW says someone in Müller's position working at the Leipzig plant will earn between $30,522 and $36,629, about 85% of the salary for the same job at BMW's Munich plant. The company aims to find 10% of its new hires among the ranks of the unemployed. So far, nearly 500 jobless have been hired.

BMW had considered building the plant in the neighboring Czech Republic. But Leipzig went to great lengths to persuade the company to locate there. Obtaining the permits needed to begin construction of the plant took just eight weeks, compared with more than a year in western Germany. The IG Metall union agreed to a number of BMW demands to let the company run machines longer in peak production phases and cut hours when demand is low -- without requiring management to give advance notice, as is typical in west German factories. "We can run our machines between 60 and 140 hours with great flexibility. That would have been impossible in the Czech Republic," says Reichenauer. "German wage costs are higher, but unit wages aren't everything."

Of course, BMW alone can't solve Leipzig's joblessness. Its unemployment rate is 18.8%, with 75,000 individuals looking for a job. Reichenauer says BMW has received 110,000 applications from all over Germany for the 5,500 jobs at the plant. But if more companies copy BMW's blueprint, they could well find the workers they need.

By William Boston in Leipzig

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