Friday, March 11, 2005

Worried about your job... you're not alone

Professor Utz-Hellmuth Felcht, put his finger on it. 'Our plants are not on wheels' he told journalists in Dusseldorf earlier this week at the company's annual results press conference. Factories cannot simply be pushed across the border to cheaper locations

The question worrying the Germans at the moment is: how long can we keep making chemicals here? The talk is of low-cost jobs and high quality products from, China and Eastern Europe.

Three hours by minibus down the road at BASF, Jurgen Hambrecht said: ‘Our heart is here in Germany: this is where our headquarters are. This is where we make decisions.’

While this is the case, the German plants will become relatively less important to both of these companies in the future.

BASF’s decision to build Verbund plants in China and Degussa’s lower-key but equally great commitment to invest in growth markets such as China and Eastern Europe will only increase the worry of German people. While companies are places where people work, they are primarily designed to making shareholders money.

Felcht estimated that it takes an investment of around Euro 5m to create 1 job in the German chemicals industry. It would create a much larger number in China, in both places there is a trade-off between the cost of staff and the cost of automation.

Of course Germany could do something about it. There could be greater political flexibility in areas such as energy pricing and employment conditions. It will be interesting to see if the IGBCE (Die Industriegewerkschaft Bergbau, Chemie, Energie (IG BCE), the industry-wide trades union can help here.

The union has recently negotiated an exception to the nationally negotiated wage rates for 500-600 jobs that will be created in Eastern Berlin for BASF’s accounting and personnel functions.

The union is surprisingly flexible in its approach to retaining as much employment as possible and has in effect negotiated a deal that allows BASF to pay lower than the going rate for these jobs in other parts of Germany. Lets ignore the Brits, French, Finns, Italians and others who will lose their jobs as this function is concentrated in Germany.

It may be unpleasant, but the Union seems to have argued that it is better that Germans get paid something to do those jobs, rather than Hungarians or Slovaks or the people who did them originally. Could this be the start of a managed reduction in the cost of doing business in Germany, or just short-term opportunism.

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