Automotive News - March 10, 2008 - (Page 14)

14 • MARCH 10, 2008 Germany’s labor setup just doesn’t work Volkswagen scandal shows change is needed Jason Stein The waste bin of corporate governance is filled with stories of things that somehow just go wrong. But there isn’t a waste bin large enough for the story that wrapped up last month in Germany. The names Klaus Volkert and HansJoachim Gebauer (among unnamed others who somehow escaped detection) will long be talked about in the hallways of automotive management — and not for the parties and special favors and tantalizing tales of prostitutes that did or did not occur but for how German companies should finally realize it is time to shape up. As you may have read in news reports, Volkert, who as works council chairman had led Volkswagen’s labor union, was sentenced to 33 months in jail for his role in a 2005 corruption scandal at VW. Gebauer, a former VW personnel executive, received a suspended sentence of one year. They weren’t the only ones to be sentenced in the scandal. Last year, EDITORIAL STAFF 313-446-0361 E-mail autonews@crain.com Web site www.autonews.com Keith E. Crain Publisher and Editor-in-Chief Peter Brown Associate Publisher and Editorial Director DETROIT 313-446-0361 Fax: 313-446-0383 1155 Gratiot Ave. Detroit, MI 48207-2997 David Sedgwick Editor dsedgwick@crain.com Edward Lapham Executive Editor elapham@crain.com Richard Johnson Managing Editor rjohnson@crain.com John K. Teahen Jr. Senior Editor Mary Beth Vander Schaaf Deputy Managing Editor Charles Child International Editor David Kushma Retail Editor Dave Guilford News Editor Philip Nussel Special Projects Editor James B. Treece Industry Editor Karen Faust O’Rourke Insight Editor COPY EDITORS: Bob Allen, Tom Fetters, Patricia C. Foley, Kenn Jones, Gregory Skwira Susan Zavela Bamford/Graphics Editor Rick Kranz/Product Editor REPORTERS: Leslie J. Allen, David Barkholz, Mary Connelly, Ralph Kisiel, Jamie LaReau, Arlena Sawyers, Robert Sherefkin, Richard Truett, Bradford Wernle, Amy Wilson Mary Raetz Director, Automotive News Data Center Debi Domby, Camille Pippen Research Assistants Dan Jones Office Manager Robertta Savage Editorial Assistant Corinne M. Price, Michael Garrison Information Center LOS ANGELES Mark Rechtin/Bureau Chief 310-739-8009 Fax: 310-832-6362 Kathy Jackson/Reporter 323-370-2481 Fax: 323-655-8157 6500 Wilshire Blvd. Los Angeles, CA 90048-4947 NEW YORK Diana T. Kurylko/Reporter Phone/fax: 908-273-6059 dkurylko@crain.com WASHINGTON Donna Harris/Reporter 540-668-7295 Fax: 540-668-7296 Harry Stoffer/Reporter 202-662-7212 Fax: 202-638-3155 814 National Press Building Washington, DC 20045-1801 MID-SOUTH Lindsay Chappell/Bureau Chief 615-371-6654 Fax: 615-371-6655 April Wortham/Reporter 615-371-6617 104 East Park Drive, Suite 315, Brentwood, TN 37027 TOKYO Hans Greimel/Asia Editor +81-3-3828-9060 Fax: +81-3-3828-9061 hgreimel@crain.com Yurakucho Denki Bldg., 20th Floor 1-7-1 Yurakucho, Chiyoda-ku, Tokyo 100-0006, Japan SHANGHAI Alysha Webb/Bureau Chief +86-21-6226-9485 Fax: +86-21-6226-9483 alyshawebb@yahoo.com TURIN Luca Ciferri/Reporter lciferri@craincom.de +39-011 961 0194 Fax: +39-011 961 0113 Viale Cavaglia, 8 10029 Villastellone (TO) Italy STAFF CORRESPONDENT: Eric Freedman/Legal file, 517-337-0269 www.autonews.com DETROIT Victor Galvan/Web Editor vgalvan@crain.com 313-446-0345 Scott Kennedy/Multimedia Editor comment The core of the labor-in-the-boardroom problem is that German-style co-determination requires a balancing act. The labor guys have to be kept happy. Management obliges. Sacrifices are made. Jason Stein is publisher of Automotive News Europe. Peter Hartz, VW’s former chief personnel officer, was given a two-year suspended sentence and a heavy fine. Hartz admitted approving payments to Volkert in an attempt to win the support of union officials. It is an invitation to corruption. Volkert got 2.6 million euros in secret payments over a 10-year period. The point of the VW slush fund was to sweeten the lives of works council delegates who, under German law, are informed and consulted on every important investment decision. Both Volkert and Gebauer are appealing their sentences. The corruption surrounding them — and those in the company who bribed Volkert or allowed those activities to take place — suggests that change is overdue. It’s time for a reform of Germany’s corporate governance law. Why is it flawed? The core of the labor-in-the-boardroom problem is that German-style co-determination requires a balancing act. The labor guys have to be kept happy. Management obliges. Sacrifices are made. It is an invitation to corruption. The VW case shows that the system is not working. 20,000 too many The automaker kept its work force too large — by about 20,000 members — even as it struggled with high costs. But because of Germany’s corepresentation law and VW’s cozy relations with its works council, most VW workers in Germany got wages well above the industry average. They had the voice in the boardroom, and they used it to everyone’s disadvantage. Said Volkert: Everyone within VW “profited,” and everything was “covered up in silence.” Reform is needed. The waste bin is overflowing. You can e-mail Jason Stein at jstein@craincom.de. It doesn’t work Simply put: Corporate governance in Germany doesn’t work. The VW case of sex, bribes and scandal rocks the whole shaky edifice of Germany’s consensus-based labor model. Don’t believe me? Just listen to the words of the guilty. Volkert told the German press recently: “At some point” the system “tears you apart, regardless of how high-principled you are.” continued from Page 12 Safety options: Let consumers decide To the Editor: I read Frank Aukofer’s column, “Beware of high tech running amok” (Feb. 25), with pure disbelief. I suppose auto engineers never would have invented 5-mph bumpers and airbags if they had taken his advice. After all, if drivers stayed far enough behind the car in front of them, there never would have been a need for those valuable features. I encourage the engineers at Volvo and every other manufacturer to continue to look for ways to increase safety for today’s drivers. We should let consumers decide which options they want. Volvo’s BLIS is in demand, and I imagine that is because consumers feel a need for it. I remember when antilock brakes were options; today, consumer demand has made them standard on just about every vehicle. To all the engineers, keep up the good work. DAVE SWARTZ General Manager VW & Volvo of Langhorne Langhorne, Pa. Volvo’s BLIS, or blind spot information system, is in demand, a reader says. So consumers must feel a need for it. are marvelous when you live in a winter climate. Air-conditioned seats are great when you wear a suit and have to drive, as I do. Back-up cameras are great when you have kids or just for parking in big cities, as I do in New York City. Every inch matters, and a back-up camera is crucial. Similarly, proximity sensors also are important when one parks in big cities. I used to think express power windows were the dumbest options money could buy. Then I realized how useful they are when paying tolls. I could go on and on, but you get the point. My parents remind me how stupid everybody thought an automatic transmission was. Don’t ever limit creativity; we need that 10 percent of useful inventions every day. ARRIEN SCHILTKAMP President Schiltkamp International Automotive Management Corp. New York as it concerns tire-pressure monitoring systems in cold climates. Almost without fail, the system will give false readings every cold morning the vehicle is started, alerting the driver to a danger that is not really present. Of course, after he or she has driven a few miles on the “underinflated tires,” the instrument panel warnings will cease. Not only is that annoying, but the driver will be trained to ignore the “safety” system. That makes it useless. It’s like a car alarm that we’ve all been trained to dismiss. STEVE HAMMES Editor-in-Chief Drive Time Productions Albany, N.Y. The writer produces and hosts new-vehicle video reviews for TV and the Web. Tire monitors are full of problems To the Editor: In his column on today’s high-tech vehicle gadgetry “running amok,” Frank Aukofer states: “There are some extremely worthwhile hightech inventions,” including tirepressure monitoring. As one who test-drives eight new vehicles a month, I can tell you that a tire-pressure monitoring system is just another form of aggravation for car owners in places where the ambient temperature frequently drops below freezing. Not a single carmaker has figured out the physical relationship between pressure and temperature We need that 10% of useful inventions To the Editor: I so agree with Frank Aukofer; however, I strongly believe it is imperative that engineers keep inventing things. As with most inventions, 90 percent are junk, but we cannot do without that other 10 percent. Incidentally, I think heated seats http://www.autonews.com http://www.autonews.com

Table of Contents Feed for the Digital Edition of Automotive News - March 10, 2008

Cheaper small cars are part of VW's U.S. plan Ford offers to buy back 81 stores As dollar dives, automakers juggle global strategies Jaguar-Land Rover deal will be signed within weeks GM Planworks chief leaves Jacoby cites dealer role in VW makeover Slim fast Nissan: Electric car to get here in 2010 Family honor Suddenly, Arkona's a key software player Chrysler may build vehicles in Russia Congress may ban mandated arbitration Volvo signs dealers willing to exit Breeding a hybrid? Prius could be a brand Honda adds benefits for same-sex partners Top China execs to speak at conference Manual for Challenger waits until '09 Ex-Sonic president: Gulf States raided Sonic GM, American Axle: Ties that bind Boardroom coup ousts Chamco executives False data imperil all auto financing Dealers would suffer if Calif. gets its way GM, Ford should bring Euro cars here Fresh ideas are fine, but Chrysler must be wary We need that 10% of useful inventions Safety options: Let consumers decide Tire monitors are full of problems Germany's labor setup just doesn't work Alabama adding auto jobs more slowly Engineer Banks strives to sip fuel, burn rubber Toyota Financial takes risks to aid dealers Honda captive beefs up dealer training in leasing NADA releases 2 subprime guides ADP develops e-sales brochure Credit unions' share of auto loans declines Upgraded auction ID carries a fee Dealers At hard-charging Hyundai, the plan is simple: More — now Genesis sedan's assignment: Boost image of all Hyundais Allied will supply sensing systems to Magna Haldex opens Mexico plant Behr gets Nano pact How Tupelo talked Toyota into building a plant there Infiniti FX showcases new Nissan technology Ford may consider hatchback for U.S. Audi to launch A4 sedan, wagon together BMW M3 convertible Saab hybrid concept has solar roof panels Toyota could bring tiny 4-seater to U.S. Hummer to push H3 pickup's usefulness New look for the SL Tiny Nano makes big waves GM's Opel unveils small hatchback that could become part of Saturn line Who says Americans don't want hatchbacks? 9-3 will dominate Saab marketing Lutz: Green takes greenbacks Leap year added to Feb. misery 9 U.S. Toyota executives will retire Ford gives employees $1,000 bonus Denso picks new N.A. CEO GM extends buyout offers CAW OKs TRW pact Lampert ups AutoNation stake Sagging Chrysler boosts spiffs Feb. output is up slightly Buick offers the Cadillac of caddies GM's board: The royal robe fits Fritz Be it metal or men, Geneva all about style Raising the roof (price) Italian cops bust Fiero-aris Consumer Reports' verdict on Chrysler products: Eeeee-uuw!

Automotive News - March 10, 2008

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