Friday, January 05, 2007

Autos and highways

Will Rogers (may have) said that there would be fewer traffic problems if the government built the cars and the roads were private.

But Ken Orski ( suggests that the world is changing: "Toll concessions, private financing and public-private partnerships continue to dominate the news ... evidence that road pricing and private sector involvement in highway financing have indeed reached (and gone beyond) the tipping point."

And on the flip side, auto regs keep mounting and climate change is shaping up to be latest cudgel.

On related matters, how the game is played at Volkswagen is discussed in this morning's WSJ. It's a delicious story of work habits and work rules in Europe as well as the power of international competition for jobs and capital.

VW's 28-Hour WorkweekGoes Kaputt in Wolfsburg

WOLFSBURG, Germany -- Time moves slowly in the town Hitler built to churn out his "people's car."

The giant Volkswagen AG factory here still bears the shrapnel scars from World War II bombs and still makes small cars -- but now it takes the company twice as many hours as its competitors to build them, roughly 50 hours for one compact.

At the same time, Volkswagen workers like Ronald Wachendorf, a 50-year-old mechanic, have enjoyed the shortest work week in the global auto industry: 28.8 hours, pulling down a full week's pay while working a day less than the 40-hour norm at General Motors Corp. and even less than the 35-hour standard at other German car makers.
VW's Wolfsburg employees will work more hours.

The extra time off from work has given Mr. Wachendorf ample time for simple pleasures: taking his 10-year-old daughter to soccer practice, playing chess with her after school, reading books about his diverse interests: philosophy, Henry Ford and the development of the German railroad.

But now, Mr. Wachendorf is having to adjust to a more hectic schedule -- at least by Volkswagen standards. In September, Mr. Wachendorf's union agreed to extend working hours at the company's German plants by more than four hours a week, to 33 hours, after the auto maker threatened to shift production outside the country. Volkswagen won't pay the workers extra to compensate for their longer schedule. On an hourly basis, the workers' wages will fall more than 14%.

"We all knew something like this would come," says Mr. Wachendorf. "The general mood among my colleagues is not good."

The change under way at Volkswagen reflects a broader trend in Europe's largest economy. With unemployment running around 10%, companies have more leverage to demand sacrifices of workers. Increasingly, businesses are pressuring employees to work longer for the same amount of money and threatening to shift production abroad.
In a country that is home to the world's best-paid auto workers, Volkswagen goes even further -- paying $69 an hour, compared with the national average of $44 and the U.S. standard of $34. Because of its reluctance to cut jobs, Volkswagen employs thousands of workers to make seat covers, exhaust systems and steering gears -- work most auto makers outsource.

With low-cost Asian rivals making inroads in Europe, Volkswagen is having to implement painful cost cuts. Over the next three years, the company is trying to shed up to 20,000 jobs -- mostly in Germany and mostly assembling cars -- by offering large severance packages to encourage workers to leave.

Despite that, the company's shift to longer hours remains hard to swallow.

"It is a pity for family life," says Sandra North, 34, a mother of two whose boyfriend works for Volkswagen. She works in one of the company's cafeterias. Ms. North says short work schedules allow more time for family activities, such as taking the children for pony rides at a stable near their home. Yet Ms. North says she also understands why her employer can no longer afford to be so generous.

"If you look at other companies around, they have always worked much more -- 38 to 40 hours," she says.

Volkswagen isn't like most companies. Its second-biggest shareholder is its home state of Lower Saxony, which has an interest in protecting jobs. More than half the seats on the company's board belong to German politicians and labor representatives, in keeping with a German law that requires big corporations to give workers a voice in governance.
Within Germany, few towns depend as much on Volkswagen as Wolfsburg, a community of 123,000 surrounded by farmland. The red-brick Volkswagen complex here covers an area the size of Monaco and accounts for more than half the town's jobs. Local streets carry the names of former Volkswagen executives.

Yet sympathy for Volkswagen workers runs only so deep. At the Tunnelschänke, a popular VW watering hole decorated with little plastic VW Beetles, bartender Carmen Stumpf shrugs as she listens to workers grouse about their new schedule.

"They don't see their situation in relation to others," says Ms. Stumpf. Wolfsburg's mayor, Rolf Schnellecke, agrees. "It was not a very just situation" that Volkswagen employees "worked four days a week and still wound up getting more money" than "normal people" in the town, Mr. Schnellecke says.

Volkswagen's short work week began in 1994. Rather than cut 20,000 surplus jobs during an economic downturn, the company shaved its work week by roughly 20%, which if it didn't trim wages and benefits, at least cut down on the cost of building cars no one wanted to buy.

The change wasn't easy for some. Ms. North's boyfriend, Thomas Jung, a 43-year-old VW factory worker, says he initially hung out in bars and played videogames. "I preferred going to work....One feels superfluous when one is needed less," he says. Gradually, though, he began going to a gym three or four times a week, and took vacations in Spain, Portugal or the Dominican Republic "at least once a year for two weeks."

After he and Ms. North began living together, he assumed other duties -- buying groceries for the weekend, picking up her children from school on his day off, making them lunch, and helping them with their homework.
"I really enjoy spending time and playing with the children," Mr. Jung says.

The good times stopped rolling in 2004, after disappointing sales of the company's flagship Golf model dropped the Wolfsburg plant into the red. Last June, the head of the company's core VW brand, addressed thousands of Wolfsburg factory workers. The company, he said, could no longer afford to pay them such high wages for such short schedules.
After months of negotiations, Volkswagen's German labor representatives agreed to extend working hours to 33 a week -- but not without extracting a promise from Volkswagen management to continue building the Golf in Wolfsburg.

The deal means thousands of VW workers are again having to adjust their schedules. Mr. Jung is cutting back his gym visits, and Ms. North has hired a baby sitter for an extra day since Mr. Jung can't pick up the children from school on Fridays now.

But the most dramatic ripple effects are outside Germany. To boost Wolfsburg's productivity, Volkswagen plans to shift some Golf production there from a factory near Brussels -- a move that has outraged Belgium's government and which is expected to result in numerous job losses there.

A Volkswagen spokesman says the company "is aware of its responsibility for" the 4,900 workers in Brussels and "will develop a socially responsible settlement." The auto maker has proposed building a new Audi model at the Brussels plant, a step that could significantly mitigate the number of job losses there.

Mr. Wachendorf, the mechanic, puts matters more bluntly. "That's part of the contract, that [VW managers] supply more [Golfs] for us," he says. "It's their problem where they get the cars from."