Expensive to build, at least in Germany.

Volkswagen Highlights Europe's Challenge

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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Volkswagen Chief Executive Officer Martin Winterkorn delivered a 16 percent increase in third-quarter profittoday, beating analyst expectations. But it came along with a blunt message for the company's 575,000 workers: "Let's be honest," Winterkorn said, "we have a lot of catching up to do with our core competitors in terms of productivity."

His comments were made in an internal presentation to VW managers obtained by Bloomberg reporter Christoph Rauwald. The company -- which counts Audi, the world's second-biggest luxury carmaker, and Skoda among its brands -- has the biggest workforce of any carmakerin the world.

QuickTake The Global Auto Industry

Autoworkers in Germany earn more per hour than those in at least 18 other countries, according to VDA, the Berlin-based German Association of the Automotive Industry. Labor costs in the U.S., for example, are about 47 percent lower, with workers earning 25.63 euros ($32.29) per hour compared with 48.40 euros for their German peers:

In the past decade, moreover, U.S. labor costs have declined by 16 percent when measured in euros, while those for Germany have increased by 19 percent. In this period, the euro appreciated by about 15 percent:

The dollar's 8 percent appreciation against the euro so far this year will provide some relief to euro-region exporters. Nevertheless, Winterkorn's decision that it was "not economically feasible" to build a new version of VW's Tiguan sport-utility vehicle in Germany suggests that, unless European manufacturers can improve their productivity, the euro region will struggle to ease its 11.5 percent unemployment rate.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor on this story:
Mary Duenwald at mduenwald@bloomberg.net