Showdown In The Ruhr Valley

A new wave of layoffs looms in Germany's industrial heartland, and unions are mobilizing for battle

Deep in the heart of Germany's Ruhr Valley, a column of 25,000 angry blue-collar workers and their families has taken to the streets of Bochum, waving banners and red union flags, beating drums and blowing whistles. This scene has been replayed often in the past four decades as one wave of jobs after another has left the Ruhr, Germany's industrial heartland. This time, unions and workers are venting their anger against a massive restructuring announced by General Motors Corp. (GM ) on Oct. 14 that will slash the company's workforce by 12,000 in Europe, including an estimated 4,000 jobs in Bochum alone. "This is a tragedy for the entire region," says Horst Krüger, a stocky, 46-year Adam Opel worker from Bochum. "We had coal, and then the mines closed. Opel came and gave people jobs. Now I don't see how we'll be able to replace the 4,000 jobs Opel wants to cut."

You want to find the dead center of the crisis gripping German industry? Go to the Ruhr Valley. The coal mines and hot metal furnaces that transformed the region into Europe's industrial engine a century ago have long since shut down, destroying 500,000 jobs. To revitalize the Ruhr, state and local governments have invested in research and education, transformed abandoned steelworks into industrial parks, and seeded new startups. But despite two decades of redevelopment effort, unemployment across the valley's main cities remains stubbornly high at 12% to 19%, well above the national average of 10%. And growth remains chronically weaker than in other regions of west Germany.


Now, as another wave of wrenching layoffs looms, the struggling Ruhr is again becoming a pivotal battleground between the unions intent on preserving decades of generous pay gains and shorter working hours and corporations increasingly desperate to save themselves. One root problem is an anachronistic system of industry-wide wage agreements that has led to spiraling labor costs, pricing German industry out of the global market. Like the rest of their German brethren, the factory hands at the Opel factory in Bochum work only 35 hours a week and earn wages of $41 an hour -- compared with $38 an hour in France. "In Germany we have the highest wages in the world in the car industry," says Ferdinand Dudenhoeffer, director of the Center for Automotive Research in Gelsenkirchen, a heartland Ruhr city once dominated by the coal industry. If wage costs don't come down, "the risk for the German economy is huge," he adds.

German auto makers already have plowed billions into new factories in eastern Europe, where labor costs are lower. But until now, German unions and workers remained confident that even as new capacity flowed east, jobs at home would remain safe. GM's sweeping restructuring of its European operations, which have racked up $3 billion in losses in the last four years, has suddenly made it clear that Germany faces another epochal loss of manufacturing jobs if unions remain intransigent. While Opel workers voted on Oct. 20 to return to work after a surprising wildcat strike, the closure of the Bochum plant -- GM's least efficient in Europe -- has not been ruled out. German auto suppliers already have shifted some 100,000 jobs to eastern Europe and Turkey over the past 10 years -- and 40% of all suppliers plan to transfer additional production abroad.

GM's crisis in Europe and a looming labor face-off at Volkswagen in November may well force long-overdue change on Germany's inflexible labor model, which works to preserve the status quo while ignoring global forces that can flatten entire industries. That model delayed a much needed restructuring of the economy of the Ruhr. In the 1980s, as coal and steel came under competitive pressure, the valley's unions, employers, and politicians banded together to protect jobs, pumping $125 billion into coal subsidies since 1980. The center-left government of Chancellor Gerhard Schröder has earmarked $2.8 billion for coal subsidies in 2004. "If those billions had been deployed in another fashion, we might have turned the Ruhr Valley into Silicon Valley by now," says Hans-Dietrich Winkhaus, president of the Institute of German Economics in Cologne and former chief executive officer of chemical giant Henkel.

One of the things Germany has done right in the Ruhr is to invest heavily in higher education and research. Until 1965 the Ruhr had no universities. Now it boasts five universities and seven advanced schools of applied sciences. In addition, 13 cutting-edge research institutes have sprung up in the Ruhr since the early 1990s, including Frauenhofer and Max-Planck, thanks to $110 million a year in federal and state funding.

State and local governments also are channeling funds into cleaning up the smokestack industry graveyards and seeding new technology parks with startups in fields such as medical technology, computer services, biotech, renewable energy, e-logistics, and environmental technology. Bochum's growing talent pool drew Finnish mobile phone maker Nokia to locate its only German factory nearby, creating 2,300 jobs.


But even optimists recognize it will take 10 to 20 years for the area's new-technology-driven industries to boost employment. Even then, tech companies can't ease unemployment among old-line industrial workers. Siloxa Engineering, a thriving Essen environmental technology company, exports to Japan, France, and elsewhere. But the six-year-old outfit only employs 12 people; sales, though growing, are just $2.2 million. Its engineers earn $2,800 a month, well below what a factory worker at Opel Bochum makes. At least these small companies understand the reality of the global marketplace. Siloxa founder and Chairman Wolfgang Doczyck voices disbelief that unions, politicians, and employers are still clinging to an uncompetitive model for negotiating wages and working conditions. "There is no chance to salvage the old system," he says. "One big company after another will leave Germany."

No question, companies like Siloxa are a healthy sign that Germany is looking toward the future rather than the past. But the real test will be whether Opel's unions face up to Germany's eroding competitiveness and roll back wages while boosting working hours -- or put their own future at risk by defending the world's most pampered working conditions. For now, the Opel workers have a potent symbol of their defiance. As the protesters shout their disapproval of restructuring, a truck rolls slowly before them, carrying two workers ringing the local union's Kampfglocke, literally the "fight bell," a massive church bell suspended above the truck on a crane. It's supposed to be summoning the workers to the struggle. It may be sounding the end of an era.

By Gail Edmondson in Frankfurt, with William Boston in Bochum

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