More on Volkswagen and the Threat to Germany's Industrial Relations Model

Yesterday I posted on the scandal at Volkswagen (Co-Determination in Germany Under Threat as Volkswagen Dispute Worsens). Today the Financial Times and Wall Street Journal offer more information on the current scandal.

Financial Times: Scandal Could Taint A Whole Labour System: (subscription may be required)

For decades Volkswagen, Europe's largest carmaker, has enjoyed a reputation for having one of Germany's most highly-developed systems of labour/management co-operation, with managers involving employee representatives in crucial decisions on the shop-floor, on the supervisory board, and all points in between.

Now that reputation is in danger of turning sour, as details leak out of an alleged bribery and fraud scandal involving senior managers and worker representatives. Moreover, many trade unionists fear the scandal could have negative labour relations implications reaching far beyond VW.

Germany's system of Mitbestimmung, or co-determination, in which workers are by law given a role in corporate decision-making, is highly advanced at VW, says Martin Höpner, researcher at the Max Planck Institute for the Study of Societies in Cologne. "VW is really an exemplary case of co-determination, since the employees' works council is very influential and management has traditionally rejected conflict, but worked in partnership with these employee representatives."

Much, therefore, is at stake for the IG Metall engineering union, which boasts a membership rate at VW of an estimated 97 per cent. Klaus Volkert, the former works council head who resigned last week over the scandal, was an influential IG Metall leader. The scandal is "very threatening for the unions", Mr Höpner says.

Wall Street Journal:  VW's Scandal Carries Fallout(subscription required)

A bribery scandal at Volkswagen AG is shining a light on corporate Germany's traditional power-sharing arrangement with organized labor.

Prosecutors in the German state of Lower Saxony are looking into whether Volkswagen officials paid bribes to some of the company's top labor leaders as a way of securing their cooperation during recent contract negotiations, an official with the prosecutor's office confirmed yesterday. The disclosure, coming less than a week after the unexpected resignation of a top labor leader at VW, has triggered a media storm in Germany, where Chancellor Gerhard Schröder and his ruling Social Democratic Party are in danger of being thrown from office by voters angry about the country's unemployment rate, which stood at 11.6% in May, a near-record in the post-World War II era.