y The Impact of Economic and Monetary Union on

Transcrição

The introduction of Economic and Monetary Union is one of the defining moments in the
development of European integration. Up to now, most of the attention has focused on the
economic and financial aspects of EMU. By contrast, the social implications of such a crucial
development have received little attention. However, it is undeniable that the impact of EMU
on the employment, pay and working conditions will have far-reaching consequences on the
lives of all European citizens.
This report looks at to what extent the face of European industrial relations is being changed by
EMU. Drawing on detailed investigations in three sectors – automotive, finance and road
haulage – it sets out to analyse the effects on the processes and outcomes, especially in terms of
collective bargaining, employment, restructuring and investment, both at sectoral and company
level. It examines the practicalities involved in introducing the euro and asks whether the
coming of EMU has led to increasing ‘Europeanisation’ of industrial relations.
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The Impact of Economic and Monetary Union on Industrial Relations – A Sectoral and Company View
14 5 4 TJ-31-00-748-EN-C
The Impact of Economic and Monetary
Union on Industrial Relations
A Sectoral and Company View
EUROPEAN FOUNDATION
for the Improvement of Living and Working Conditions
The Impact of Economic and Monetary Union on Industrial Relations
The European Foundation for the Improvement of Living and Working Conditions is an autonomous body of the
European Union, created to assist the formulation of future policy on social and work-related matters. Further
information can be found at the Foundation website: www.eurofound.ie.
About the authors
Keith Sisson and Paul Marginson are respectively Emeritus Professor of Industrial Relations and Principal Research
Fellow in Industrial Relations at the Industrial Relations Research Unit at the University of Warwick in the United
Kingdom.
Keith Sisson and Paul Marginson
EUROPEAN FOUNDATION
Wyattville Road, Loughlinstown, Co. Dublin, Ireland. Tel: +353 1 204 3100 Fax: +353 1 282 6456/282 4209 E-mail: [email protected]
Cataloguing data can be found at the end of this publication
Luxembourg: Office for Official Publications of the European Communities, 2000
ISBN 92-897-0011-4
© European Foundation for the Improvement of Living and Working Conditions, 2000
For rights of translation or reproduction, applications should be made to the Director, European Foundation for the
Improvement of Living and Working Conditions, Wyattville Road, Loughlinstown, Co. Dublin, Ireland.
Printed in Ireland
The paper used in this publication is chlorine-free and comes from managed forests in Northern Europe.
For every tree felled, at least one new tree is planted.
Contents
Foreword
vii
Chapter 1
The starting point
1
Chapter 2
EMU and industrial relations: an overview
7
Chapter 3
The automotive sector: ‘coercive comparisons’ take effect
19
Chapter 4
The finance sector: national and international developments
39
Chapter 5
The road haulage sector: challenges and opportunities
65
Chapter 6
Multispeed ‘Europeanisation’: the three sectors compared
83
Chapter 7
Conclusions and implications for the future
95
Annex
Social implications of EMU: guidelines for national reports
References
101
111
v
vi
Foreword
Few would deny that the introduction of Economic and Monetary Union (EMU) was one of the
defining moments in the development of European integration. So far, the focus has been mostly
on the economic and financial implications of EMU; by comparison, its social implications have
received very little attention. While the economic and financial implications of such an historic
step are fundamental, so too are likely to be the social implications. It is not just social policy at
both European Union and national levels that is involved, but also the income and conditions of
European citizens.
It was to help fill this vacuum that in 1998 the European Foundation for the Improvement of
Living and Working Conditions decided to launch a research programme with two major
objectives:
•
to assess the impact of EMU, especially on employment, industrial relations and working
conditions at European Union level;
•
to facilitate the debate between the social partners, national and EU policy makers on the
social impact of EMU.
In an initial phase, the Advisory Committee set up to oversee the programme decided to
commission two literature reviews to establish what scientific analysis had already been carried
out. One of these was in the area of industrial relations and the other that of social conditions and
benefits.
The reviews revealed that commentators had been using EMU to describe two processes without
always distinguishing between the two. The first, which might be labelled the narrow view, is to
vii
see EMU in terms of the setting up of the European Central Bank (ECB) with responsibility for
setting a single monetary policy, a single currency and the Stability and Growth Pact designed to
put teeth into the public deficit provisions. The second is to see EMU as the ongoing process
involved in establishing the single European market of which these three events are just one
stage, albeit a fundamentally important one.
In a second phase of the project, the Advisory Committee decided to carry out an investigation in
both the private and the public sector to ascertain the views of social partners at sectoral and
company levels about the impact EMU has had so far. In the case of the private sector, which is
the concern of this report, three sectors were chosen, automotive (manufacturing and
components), financial services (banking and insurance) and road transport, to reflect a range of
institutional arrangements and market structures as well as sectors making a significant
contribution to the economic performance of most European Union countries.
The report that follows draws on these country investigations to present a cross-national
overview of the social partners’ views on the impact of EMU so far. Focusing on the
practicalities involved in the introduction of the euro and the general impact of EMU on the
processes of industrial relations, it also throws light on wider considerations such as its effects on
pay and employment, restructuring and work organisation.
Raymond-Pierre Bodin
Director
viii
Eric Verborgh
Deputy Director
Chapter 1
The starting point
This report is concerned with the views of the social partners on the introduction of Economic
and Monetary Union (EMU) to industrial relations in the European Union. For present purposes,
EMU is defined both narrowly (a single currency, the setting up of the European Central Bank
with responsibility for setting a single monetary policy and the Stability and Growth Pact
designed to put teeth into the public deficit provisions) and broadly (the ongoing process involved
in establishing the single European market). The report’s specific focus is on the impact of EMU
on the processes of industrial relations and the result in terms of pay and employment at sectoral
and, in particular, company levels. It draws on detailed investigations undertaken in three sectors
(automotive, finance and road haulage) chosen on the basis of their different institutional
arrangements and market structures in six European Union member countries (Finland, France,
Germany, the Netherlands, Spain and the United Kingdom). In each case, the investigation
involved the collection of documentary materials from and interviews with management and
employees’ representatives from companies, employers’ organisations and trade unions.
Altogether, therefore, this report is based on 18 sector studies and 54 company studies.
This introductory chapter has two main objectives. The first is to remind the reader of the main
issues that arose in the literature reviews listed in the preface and which helped to structure the
report. The second is to explain in more detail how the investigations on which this report is
based were conducted.
EMU and the changing context for industrial relations
As the literature review undertaken by the Industrial Relations Research Unit of the University of
Warwick (IRRU) (Sisson et al,1999) pointed out, proponents and opponents of EMU alike agree
1
that, as well the savings on transaction costs, the main benefits of a common monetary policy
and a single currency will come in the form of the efficiency gains from the greater transparency
of prices and the creation of a large euro capital market, with the latter boosting the significance
of a so-called ‘super league’ of European multinational companies, thereby giving further
impetus to competition. A recurring theme is that a single capital market, driven by global stock
market considerations, will accelerate changes in the dominant model of business organisation.
Significantly, it is argued that the so called ‘Rhineland’ model of corporate governance, in which
social considerations vie with economic ones, will give way to the ‘Anglo-Saxon’, in which
shareholder value predominates.
A great deal of restructuring is envisaged as these developments reinforce the establishment of a
single European market. Although a firm supporter of EMU, the chairman of Unilever is quoted
(Barber, 1998) as talking in terms of it delivering a ‘juddering’ shock to the European economy
about which political leaders need to ‘come clean’: ‘The unspoken reality about EMU is that in
every sector, in every community, there will be winners and losers … although we all believe that
in the long run the winners will out-number the losers’. Financial markets are expected to
become quickly integrated, involving ‘a wave of mergers’, which will take place first among
banks (because they will lose revenue from foreign exchange trading and underwriting local
currency equity and bond issues) and then among insurance companies and other retail financial
service groups. The integration of consumer goods markets will take longer, it is argued, largely
because retail prices will not shift to the euro until 2002, although this is happening much earlier
in the case of prices between suppliers. In any event, manufacturing is expected to become fairly
quickly involved. Not only will the propping up of inefficient industries become less viable, the
move towards the most cost-efficient operations will also be accelerated.
In theory, the movement of workers could accommodate much restructuring. Yet a European
labour market has hardly developed and is unlikely to do so for the foreseeable future. Workers in
potential source countries are reluctant to migrate, and intra-European integration on a large
scale is likely to be perceived as socially disruptive. Most commentators agree that there is likely
to be a lot more capital mobility than labour mobility, adding to the pressure for restructuring.
A great deal of both the economic and industrial relations literature focuses on the possible
implications of the much-changed economic policy context which EMU brings. With the
European Central Bank responsible for setting interest rates in order to fulfil its remit of
maintaining price stability, the ability of individual governments to devalue and reduce
indebtedness through inflation has been removed. Public sector deficits are limited to a
maximum of 3 per cent of GDP under the Stability and Growth Pact, subject to the
circumstances, which means that government will have relatively little leeway in terms of public
expenditure. At the same time, the EU’s budget remains small (1.25 per cent of European
Community GPD in 1996) compared to that of a federal state and member countries continue to
enjoy fiscal autonomy subject to agreement to deal with the dangers of tax competition. Yet there
is no mechanism available at EU-level to intervene in the event of a so-called ‘asymmetric’
shock in which individual countries or regions are differently affected. There is no federal system
of social security or, more importantly for present purposes, unemployment insurance, to
2
The starting point
compensate for the fact that individual governments will have their hands tied by the limits on
public deficits.
The net result is that the bulk of the adjustment is expected to fall on the labour market (wages
and employment) and social protection systems. Governments, management and trade unions
will be obliged to engage in forms of ‘regime competition’ to use Streeck’s (1992) term. In other
words, governments will have to offer an attractive investment environment, which will mean
keeping a tight rein on public expenditure, including social charges, and management and trade
unions will be pressured to re-adjust their pay and employment arrangements to produce the
most effective quality-cum-unit labour cost packages.
Fuelling these concerns are worries about the reasons for the gaps in the architecture of EMU
and, in particular, the lack of a social dimension. Put simply, one view sees these gaps as flowing
from the essentially economic nature of European integration with the implication that the social
dimension is regarded as of secondary importance. A second view sees economic union as
‘deliberately underdeveloped’. Here the explanation for the missing key elements reflects the
importance rather than unimportance of the social dimension: any reform of the social model,
because of the delicacy of tackling the problems directly, is best left to the market.
The implications for the processes of industrial relations
The literature review undertaken by the IRRU found that there was a widespread consensus that
EMU was likely to have significant implications for the processes of industrial relations. This
was especially true of the sectoral multi-employer bargaining that is the predominant method of
determining pay and conditions of employment in most EU member countries (the exceptions
being Ireland and the UK). As well as growing pressures for the greater ‘Europeanisation’ of
industrial relations discussed below, there was speculation about the extent to which EMU would
exaggerate the tendencies towards both centralisation and decentralisation taking place in the
structure of national systems of collective bargaining in recent years. In an increasingly
European, if not global, marketplace, it was not just the social partners that were finding
themselves under pressure to respond to the challenge of ‘regime competition’ by making their
industrial relations arrangements more ‘competitive’ relative to those of other organisations,
leading to more workplace negotiations. Simultaneously, governments had also felt obliged to
intervene to encourage the moderation of wages and the reform of social protection systems,
reflecting the need to bring public finances into line with the EMU convergence criteria and
create an attractive environment for investment. Very often, this had taken the form of the
negotiation of so-called ‘social pacts’ at the interprofessional level.
The key question raised by the literature review was how far the decentralisation would go. One
scenario was that it could result in a break-up of the dominant structures of multi-employer
bargaining and eventually lead to the so-called ‘Americanisation’ of European industrial relations
in which collective bargaining eventually plays only a minor role in determining pay and the
conditions of employment. Paraphrasing the views of the Harvard scholar, Martin (1999), Dølvik
and Foden (1998) write:
3
‘His thesis was that institutional shape of EMU as it emerges would create strong pressures for the
“Americanisation” of the European labour market – deregulation, weakening of trade unions, the
end of, or at least severe limitations on, coordination of bargaining. The process of economic
integration in general, and EMU specifically, would undermine the capacity of nationally-based
unions to limit competition based on terms of employment because the supportive framework
which underpins their capacity to do so is nationally based. Indeed, increasingly unions based in
different national settings would be thrown into competition with each other.’
The second major issue to emerge from the industrial relations literature reflects a long-running
debate about diversity and convergence (see, for example, Ferner and Hyman, 1998:). It is the
extent to which EMU will lead to the greater ‘Europeanisation’ of the processes of industrial
relations. A common theme is that the greater transparency of wages and costs under EMU will
encourage greater cross-national comparability. Indeed, it is precisely because of the pressure on
them to reach nationally competitive wage settlements that trade unions are expected to explore
the possibilities of cross-border cooperation in collective bargaining. Clearly, both EU sectoral
and Euro-company levels are potentially involved. Most attention, however, has focused on
employee expectations in multinational companies (MNCs), because of the introduction of
European Works Councils (EWCs). The expectation is that, whatever else EWCs do, they will be
an important vehicle for the exchange of information between employee representatives
(‘networking at management’s expense’ as one personnel director has put it). Also reckoned to be
important are the comparisons of costs and productivity performance that the management of
MNCs is expected to make. Indeed, such comparisons are likely to be intrinsic to management
investment decisions, regardless of any pressure from employees for wage comparability,
because of the greater element of competition that EMU is expected to bring.
The implications for pay and employment
There would seem to be a consensus that, in the light of the coming of EMU, ‘generalised
moderation’ has been the prevailing trend of wage developments in most countries, although it
remains to be seen if this continues to be so. There has been more controversy over the issue of
wage convergence between employees doing identical or near-identical jobs in different EU
member countries. For example, in an article entitled ‘EMU – will it lead to a European wage?’
in the first issue of EMU: The Journal for Business (launched in 1998), its author – a pay
specialist – is quite sceptical suggesting that, on balance, the divergent pressures are likely to
outweigh the convergent.
A major difficulty that commentators have had in discussing the implications of EMU for
employment is in unravelling the macro and the micro effects. There has nonetheless been an
important debate about the regional implications of the restructuring that is expected to take
place. Many commentators are expecting EMU to accelerate the flow of investment, and hence
employment, towards the most cost-efficient regions and countries. Some argue that this will
benefit the lower cost and less heavily regulated ‘periphery’ of the EU at the expense of the
higher cost, more heavily regulated ‘core’. Others, who tend to the divergence view, argue
against this. In the low-wage sectors of low-wage countries, they argue, the ‘newly-exposed’
industries are indeed likely to attract investment from higher-wage countries because of their
4
The starting point
potential for expansion. In the high-wage sectors, however, where wages are a smaller part of
total costs, and there is less incentive to switch investment to low-wage countries, it could be a
very different story. Indeed, there is the possibility that in these cases high-wage countries, rather
than the periphery, will benefit because of the superiority of their infrastructure, skills and
training. A variant of this second view is that it will be regions of Europe, rather than individual
countries, that will be the key variable in these decisions.
Method of approach
In the light of the two literature reviews and subsequent discussions with the researchers
involved, it was agreed that the next phase of the project should adopt a comparative ‘companyin-its-sector’ approach. The reason for focusing on the firm or company is that this is the basic
unit of decision making in industrial relations and has too often been forgotten both in reviews
of industrial relations developments and treatments of the economic implications of EMU.
Abstracted from its sector, however, the company is shorn of its context. The sector has a
powerful influence on the market structure to which management has to relate, together with the
technology, as well as being important in shaping ideas about ‘accepted’ and ‘best’ practice.
Three sectors were chosen as the basis of the comparison studies: automotive (manufacturing and
components), finance (banking and insurance) and road haulage. Each plays a significant role in
the economies of most EU countries, being a substantial employer. Each involves a number of
companies that are international in their reach. Each is characterised by different market
structures, technologies and institutional arrangements, as later chapters will describe in more
detail.
Altogether, six countries were selected: Finland, France, Germany, the Netherlands, Spain and
the UK. Along with budgetary considerations, the main criteria here were regional spread, size
and contrasting industrial relations systems. It also seemed sensible to include one member that
had not yet signed up for the euro. The UK was chosen because of its size and the key role that
MNCs play in both the automotive and finance sectors. The six countries, along with the names
of the individuals involved in preparing the national reports, were as follows:
Finland :
France:
Germany:
Netherlands:
Spain:
United Kingdom:
Kari Alho
Alice Le Flanchec and Jacques Rojot
Anni Weiler
Rien Huiskamp
Elena Alonso, David Saez and Juan Carlos Collado
Keith Sisson, Paul Marginson, Jim Arrowsmith, Tony Edwards and
Helen Newell
To maximise the scope for comparative analysis, it was further agreed that, in so far as was
possible, the interviews with social partner representatives should be undertaken using a
common set of guidelines, which appear in full in the annex. In brief, they focus on the following
issues:
5
•
the practicalities involved in introducing the euro;
•
the implications of EMU for the processes of industrial relations (the pressures EMU is
likely to generate for the greater ‘Europeanisation’ of industrial relations and the challenges
it poses to national systems of industrial relations);
•
the implications of EMU in terms of the main outcomes of these processes, that is pay and
employment; and
•
the wider considerations relating to the impact of EMU on restructuring and on the
dominant forms of business organisation.
In the event, in each country the investigations resulted in a total of three sectoral case studies
and nine company case studies ( that is three in each of the three sectors), making a grand total of
72 case studies. In each case, the interviews were undertaken over the summer and autumn
months of 1999, as was the writing of the national reports. In the automotive and finance
sectors, it was possible to secure face-to-face interviews with management and employee
representatives in every case. In road haulage, where it seemed sensible to include a number of
the small companies that make up the overwhelming majority, there had to be telephone rather
than face-to-face interviews in some cases. A number of the companies in road haulage also did
not have employee representatives to be interviewed. Face-to-face interviews were nonetheless
held with senior trade union officials in this sector in each of the countries, as they were in
automotive and finance, and there is no reason to believe that the findings were adversely
affected.
The only major problem to emerge from the interviews mirrored that encountered in the
literature reviews. In talking about the practicalities of introducing the euro, respondents were
very clear about the definition of EMU being used and were able to distinguish its impact. In
discussing the implications for the processes and outcomes of industrial relations, however, most
found it difficult to distinguish between the impact of what has been described earlier as the
‘narrow’ and the ‘broad’ definitions of EMU, that is a common monetary policy and a single
currency as against the process involved in establishing the single European market. Very often,
too, as in the case of much of the literature reviewed, they found it difficult to distinguish the
impact of these developments from the wider processes of globalisation and technological
change with which many of them were confronted.
This problem poses particular difficulties in presenting the findings. If every single finding is to
be discussed throughout the report in terms of the various possibilities, the presentation would
become totally indigestible. The compromise adopted is a variant of that used in the interviews.
In so far as it is possible, the report discusses independent effects where they have been recorded
and emphasised. Otherwise, it leaves the issues of the distinctive effects of the two definitions of
EMU and their independence of other developments to the two final chapters, which deal
respectively with the comparisons and contrasts between the three sectors and the report’s overall
conclusions and implications.
6
Chapter 2
As the previous chapter has indicated, many commentators see EMU as a major harbinger of
change in the processes of industrial relations. In the first instance, most associate EMU with the
seemingly contradictory but actually complementary processes within national systems of
decentralisation (in the form of the rise of company bargaining) and centralisation (in the form of
‘social pacts’ or national incomes policies). In the second, and more controversial, instance some
expect EMU to promote the greater ‘Europeanisation’ of industrial relations as the social
partners and governments begin to adjust and develop institutional arrangements to cope with the
single European market that EMU reinforces. Here there are three levels that have to be
considered: the EU interprofessional level, the EU sectoral level and the Euro-company level.
Much of this ground has been exhaustively covered in the literature reviews (Sisson et al., 1999;
Pochet et al., 1999) that constituted the first phase of the project and in recent comparative
industrial relations texts (see, for example, Ferner and Hyman, 1998; Kauppinen, 1998). This
chapter therefore restricts itself to a brief overview of recent trends and developments in
industrial relations at national and EU levels designed to put the findings from the three sectors
into context.
Trends and developments in national industrial relations systems
The rise of company bargaining
As Table 1 confirms in the case of the three sectors in the six countries, with the exception of the
UK multi-employer bargaining at sectoral level has tended to be the predominant method of
determining pay and the conditions of employment. In recent years, however, there has been a
considerable growth in the amount of activity at company level involving negotiations between
7
management and trade union and/or work council representatives in each of the countries. To
paraphrase a range of authors (for example, Streeck, 1987; Dore, 1989; Katz, 1993; Marginson
and Sisson, 1996), three issues appear to be important:
The development of organisation-based employment systems. This reflects the intensification of
international competition, characterised by uncertainty and rapid shifts in demand, from the late
1970s onwards. Increasingly, management have been pressing to introduce employment and
work practices which are tailored to their own business requirements and which are difficult to
cater for in agreements concluded at multi-employer level. Many also feel that the adversarial
relationship often accompanying the negotiation of multi-employer agreements – including
national strikes and lockouts in some countries – sits uneasily with the culture change that they
are seeking to bring about.
The changing nature of control systems within companies. Aided by the revolution in information technology, the emphasis has shifted from systems of administrative to performance control
such as the achievement of budgetary targets, where responsibility and accountability are
devolved to the business units at lower levels of large organisations. These systems of ‘managed
autonomy’, in which central management maintains control through an extensive web of formal
and informal performance measures, place a premium on the bottom-line responsibility of
individual business unit managers for labour as well as other costs. Continued reliance on multiemployer bargaining is called into question because its role in determining labour costs runs
contrary to the logic of devolved budgetary responsibility.
A shift in bargaining power. As a result of the changing economic and political context, many of
the benefits which management traditionally perceived multi-employer bargaining to have
offered no longer appear as persuasive. Management feels less need of the protection from trade
union pressure to shape the wage-effort bargain within the workplace. At the same time, the
pressure not to concede general improvements in pay and conditions that increase costs have
increased significantly as competition intensifies. Furthermore, the opening up of international
markets means that, for many medium as well as large employers, multi-employer bargaining
within the nation state no longer provides a floor taking labour costs out of competition.
Research also confirms that multinational companies have been to the fore in the rise of
company bargaining (for further details, see Mueller and Purcell, 1992; Marginson et al., 1995).
In the face of the internationalisation of markets, and spurred on by the creation of the single
European market, they have been adopting continent-wide strategies for production and the
servicing of markets. Emphasis has also been shifting from territorial forms of organisation,
embracing operations within individual countries, to international forms responsible for a
particular line of business across different European countries (for example international product
divisions), leading to the adoption of systems of performance control covering indicators of
labour performance as well as measures of financial and market performance). The information
from these performance comparisons can be used to exert pressure on business unit management
and extract concessions in employment and working practices from local workforces keen to
8
secure future investment. In effect, there is an internal ‘market’ for investment. Strongly
performing sites can be ‘rewarded’ by investment, whilst poorly performing ones can be
‘punished’ and even closed. By exerting a strong disciplining effect on the bargaining behaviour
of local management and workforces, the exercise of these ‘coercive comparisons’ provides
MNCs with a powerful new mechanism to neutralise the influence of the workplace. In these
circumstances multi-employer agreements grounded in national systems, far from bringing the
advantages they used to, can be a major impediment to change.
Table 1
Collective bargaining arrangements in the six countries at sectoral level
Country
Automotive
Finance
Road haulage
Finland
• Sectoral agreement at
national level
(metalworking)
• Company agreements
with TU representatives
• Sectoral agreements
at national level
(banking and insurance)
national level
• Small number of company
agreements with TU
representatives
France
• Sectoral agreements at
national and department
levels (metalworking)
• Sectoral agreements
at national level (private
national level
banking, savings banking • Small number of company
and insurance)
agreements with TU
representatives
Germany
Land level
(metalworking)
• Company and/or works
council agreements
national level (private
district level
and insurance)
and/or works council
• Company and/or works
agreements
council agreements
Netherlands
national level
(metalworking)
with TUs/ works
council representatives
national level (banking
and insurance)
with TUs/ works council
representatives
Spain
• No sectoral agreement
• Company agreements with national level (private
provincial level
TUs/worker committee
representatives
and insurance)
agreements with
• Company agreements with TUs/worker committee
TUs/worker committee
representatives
representatives
UK
• Company and/or business
unit agreements with
TUs/shop stewards
national level (2)
agreements with
TUs/works council
representatives
• Company and/or business
regional level
unit agreements with
TUs/local representatives
and/or business unit
agreements with TUs/shop
stewards
9
The literature review by the Industrial Relations Research Unit of the University of Warwick
(Sisson et al., 1999)) found that, although there has been a growing debate in Europe about the
future of multi-employer bargaining in the light of these developments (see, for example, EIRR,
1997), few commentators subscribed to the ‘Americanisation’ thesis outlined in the previous
chapter. Reform rather than abolition seemed to be the main issue on the agenda. As Ferner and
Hyman (1998) conclude on the basis of specialist reviews of developments in EU member
countries, ‘firms have exerted little pressure for radical decentralisation: in case after case our
contributors report that while employers are anxious to see greater flexibility at corporate level,
they wish also to preserve the framework of labour peace by a structure of higher level
agreements’. Moreover, they go on to suggest that what they described in the previous volume
(Ferner and Hyman, 1992) as ‘centrally coordinated decentralisation’ (or what Traxler (1995) has
called ‘organised decentralisation’) has been the major trend.
For example, according to the German investigation carried out as part of this project, an
important recent feature of collective bargaining in that country is‘opening clauses’. In
metalworking, especially, ‘opening clauses’ have created the option to deviate from the uniform
and binding standards of the sector agreements in areas such as working time and pay. Bispinck
(1998) distinguishes two parallel but overlapping variants of ‘adaptations’:
•
differentiation: implementation of differing, collectively agreed standards for certain groups
of employees, enterprises or parts of branches; and
•
lowering of collectively agreed standards: uniform reduction of collectively agreed provisions and payments for all employees of one enterprise.
It is the level of regulation of those provisions enabling companies to diverge from the sectoral
agreement that is crucial. Some options are a regulation in the sectoral agreement itself or provide scope for decisions on the enterprise level. Some ‘opening clauses’ can only be applied at
the plant level based on the specific legal form of ‘voluntary’ enterprise agreements. Differing
provisions concern the involvement of the collective bargaining parties in the application of
opening clauses (Bispinck, 1998). Provisions on ‘opening clauses’ and on differentiation of pay
range from a reduction of collectively agreed basic pay, suspension of pay increases (‘hardship’
clauses), different adaptation of provisions in collective agreements according to the size of the
company and entry pay rates for particular groups of employees to provisions on holiday
remuneration, annual special bonuses and apprenticeship payment (see Bispinck, 1997; Bispinck,
1998; Bahnmüller et al., 1999). Another new feature has appeared in both the chemical industry
and the construction industry in eastern German agreements, providing for both ‘income
corridors’ and profit sharing in those companies that are capable of affording it (see Weiler,
1998).
Within trade unions, intensive and controversial debates have taken place about whether such
collectively agreed provisions are the beginning of the end of multi-employer bargaining or the
end of the beginning of a break-down of centralised collective bargaining. Thus far, however,
only in the UK has single employer bargaining superceded multi-employer bargaining (although
sectoral multi-employer bargaining is also rare in Ireland). Yet here there have been special
considerations such as the particular scope and form of collective agreements (essentially
10
‘procedural’ rather than ‘substantive’ agreements, which did not have the status of either legallyenforceable contracts or codes), the significant presence of multinational companies (especially
US-owned), and the opposition to multi-employer arrangements expressed by Conservative
governments throughout the 1980s and early 1990s (see Edwards et al., 1998). The implication,
as Traxler (1998) has recognised, is that sectoral agreements in other EU countries are likely to
remain an important source of employment regulation as long as they retain a strong substantive
component.
Social pacts
Whereas the first development within national industrial relations systems is virtually universal,
the second is far from being so. Indeed, differences in this regard are the major distinguishing
feature of national structures of collective bargaining. It is the extent to which the
decentralisation described above is also accompanied by the emergence or re-emergence of
forms of ‘macro-concertation’ involving governments and the main social partner organisations.
The details differ from case to case as Table 2 outlines. Typically, however, key features of what
have come to be known as ‘social pacts’ have been commitments to promote investment and
create more employment in exchange for moderation of wages, a reduction of public expenditure
(reductions in unemployment benefit and the reform of the social protection system) and the
lowering of income tax. Major objectives have been to further productivity, competitiveness and
growth of companies, as well as ensure that public finances stayed in line with the EMU
convergence criteria.
Table 2
Collective bargaining arrangements in the six countries at national level
Finland
Long tradition of national interprofessional agreements. Emphasis of most recent
agreement has been on incomes policy and establishment of ‘buffer’ funds to cope
with possible shocks that might arise after the introduction of EMU.
France
No major national interprofessional agreements since 1995 (although ARPE scheme
covering unemployment benefit renewed in 1998). Ongoing informal social dialogue.
Germany
No tradition of national interprofessional agreements. Unsuccessful attempts to
negotiate ‘Alliance for jobs’ in 1996 and 1999. Ongoing informal social dialogue.
Netherlands
Long tradition of national interprofessional agreements and social dialogue in the
Foundation for Labour. Following the Wassener agreement of 1982 there has been a
series of national level understandings in which wage moderation has been exchanged
for reductions in social charges and improvements in employment policy. There have
also been agreements on the future agenda for collective bargaining (1993 and 1997)
and a number of training and employment issues as well as legislative measures
designed to promote ‘flexicurity’.
Spain
Over the last years there has been a series of interprofessional agreements. These
include agreements dealing with further training (1996), vocational training policy
(1996), health and safety (1996) pensions (1996), extra judicial solutions to labour
disputes (1996). In 1997, there were three agreements, under the label ‘Labour
agreement for employment’, dealing with ‘employment stability’, collective
bargaining’ and ‘filling the gaps in regulation’. In 1996 the process of substitution of
Labour Ordinances, which had in the past governed the terms and conditions of
employment, by collective bargaining practices came to an end.
United Kingdom
No tradition of national interprofessional agreements. Ongoing informal social
11
dialogue.
In two countries, Finland and the Netherlands, such an approach has been long-standing. In
Finland, there have been two centralised incomes policy agreements in recent years, in 1995 and
1997, involving the leading organisations of employers and trade unions along with the
government, in which a pay norm has been reached. Against the background of the serious
asymmetric shock of the early 1990s, the 1997 agreement also included provision for ‘buffer’
funds. The aim is to collect funds within the social security system so that, in the event of a
possible adverse shock, a rise in the employers’ social security payments could be avoided by
running down the accumulated funds.
In the Netherlands, there has been no centralised wages policy agreement as such in recent years.
A broad consensus about the need for pay moderation has nonetheless been reached, coupled
with the major features of the labour market to be addressed. The result has been a series of
agreements and government measures, including understandings on the agenda for priority items
of collective bargaining at sectoral and company levels.
In Spain, ‘macro-concertation’ is a relatively recent phenomenon. In its most recent form, the
parties have eschewed a ‘grand’ over-arching agreement, preferring instead to tackle a number of
related issues on a relatively independent basis. Especially noteworthy, however, has been the
emphasis on reforming the labour market and moving from the highly regulated state system of
the past to one based on collective bargaining.
In three other countries, ‘social pacts’ continue to be noticeable by their absence. In Germany,
there have been two attempts to achieve the substance of such arrangements in the form of an
‘Alliance for jobs’, in 1995-1996 and 1999-2000, but both were unsuccessful in the sense that no
formal agreements were reached. In France and the UK, there have been no serious attempts to
follow suit, reflecting the very different industrial relations traditions of these two countries. In
France, where the state continues to play an exceptional role in employment matters, the socialist
governments of the late 1990s have sought to use legislation regarding working time as the main
vehicle for tackling unemployment and promoting competitiveness. In the UK, where the links
between pay, employment and competitiveness are seen primarily as an issue for management
and trade unions in what is still a highly ‘voluntarist’ system of industrial relations, the
government has largely restricted itself to exhortation.
In any event, as the IRRU literature review reported, there is a widespread consensus that
‘generalised moderation continued to represent the prevailing trend of wage developments in the
large majority of European countries in recent years’ (Fajertag, (1997) (see Table 3). Initially, this
reflected a decline in growth and an increase in unemployment, coupled with a fundamental
change in macroeconomic policy as governments turned their backs on Keynesian demand
management in favour of monetary policy and improving the efficiency of the supply side. In
recent years pay increases continued to lag behind productivity improvements, with the approach
of EMU reinforcing the pressure on competitiveness.
12
Table 3
Nominal and real wage growth from 1994 to 1998 and forecasts for 1999 in western
Europe, USA and Japan
Nominal1
Real2
1994 1995 1996 1997 1998 1999
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
UK
EU 15
USA
Japan
3
1994 1995 1996 1997 1998 19993
3.0
2.6
3.0
1.0
2.4
2.5
13.3
2.8
3.2
4.2
1.7
3.0
4.3
3.5
4.6
1.7
3.8
3.4
3.8
2.9
2.9
3.6
4.0
2.5
3.9
13.5
1.3
4.8
2.2
2.1
2.6
4.5
2.2
2.9
1.6
3.0
3.4
3.4
1.7
1.5
3.1
3.1
2.9
2.5
11.5
3.2
6.1
1.8
1.8
2.5
6.3
3.8
6.5
0.7
3.5
3.5
2.5
0.6
0.3
3.8
1.4
2.1
1.4
12.4
4.3
4.2
2.8
1.8
4.8
4.0
2.5
3.7
2.7
4.6
2.7
4.0
2.9
2.3
3.0
5.1
2.4
1.4
5.8
5.3
–1.5
0.5
2.6
7.1
3.7
2.9
3.2
0.5
5.5
2.3
4.9
2.5
1.8
4.3
3.5
2.1
2.6
4.3
6.0
2.3
1.9
3.7
5.1
5.3
2.4
3.4
1.5
4.8
3.0
4.0
1.4
0.1
1.0
–1.0
0.7
–2.0
1.5
4.0
–0.7
1.8
–0.5
1.5
–1.1
–1.1
1.1
0.8
0.9
0.3
1.4
1.4
1.2
1.6
3.8
1.0
1.9
4.2
–0.7
–0.9
0.1
0.6
–0.2
0.3
–2.3
–0.3
0.1
0.4
0.4
1.3
–0.8
–1.3
1.0
1.6
0.8
0.6
2.8
0.9
1.1
0.2
0.6
1.0
3.3
0.3
5.2
-0.4
1.6
0.8
0.8
–1.1
–1.9
1.8
–0.5
0.6
–0.3
6.5
1.8
1.6
1.1
–0.3
2.3
1.8
0.0
1.3
2.1
2.1
0.5
2.1
2.2
1.58
1.2
3.5
1.4
0.5
1.0
1.5
–3.7
–1.1
0.8
4.5
0.8
0.8
2.3
0.8
3.4
0.6
4.3
1.9
0.6
2.1
2.1
1.3
1.9
1.9
2.9
0.6
1.0
1.4
2.8
3.0
0.1
2.7
0.7
3.2
1.6
2.4
0.6
1.6
2.5
1.2
–0.1
-0.5
0.0
2.1
2.2
–0.2
–0.6 –0.2
Sources (based on EC, OECD and Eurostat data): Columns 1 and 7, Fajertag, 1997; Columns 2 and 8, Fajertag, 1998; Columns
3,4,5, 6, 9, 10, 11 and 12, Fajertag, 2000 (http//:www.etuc.org/etui).
1
Nominal compensation per employee; total economy.
2
Real compensation per employee, deflator private consumption; total economy.
3
Forecast.
Trends and developments in European Union industrial relations
The EU interprofessional level
There have been two main developments here. The first, which is a key element in the context, is
the increasing importance of collective agreements in the social policy process marked by the
incorporation of the so-called Maastricht social chapter into the Treaty of Amsterdam in 1997.
Under this arrangement the European Commission is not only obliged to consult with EU social
partners on proposals for employment regulation, but also to offer them the opportunity of
negotiating EU-wide agreements which can be returned to the Commission for introduction in
the form of a directive. So far there have been agreements on parental leave, equality of
treatment for part-time workers and fixed-term contracts.
The second, which is the development of an employment strategy, is closely related to EMU.
Concerns with the persistent high levels of unemployment across Europe have become
increasingly important. According to Commission Directorate DG V, ‘despite its many strengths,
Europe has not managed to meet one of its key objectives: to generate employment opportunities
13
(1999). As well as difficulties in handling macroeconomic shocks, which EMU is designed to
help remedy, an inability to handle the transformation of the labour market is emphasised. The
EU, says the Commission, does not have ‘a good springboard to new skills and jobs’. ‘At the
same time Europe’s adaptation to new technologies is relatively slow both in terms of work
organisation and the lack of opportunities for those in work and for those out of work to develop
and renew their skills throughout their working life’ (ibid.). As well as giving employment a
treaty basis at the Amsterdam Inter-Governmental Conference in June 1997, the extraordinary
jobs summit in November of the same year began a rolling programme of yearly planning,
monitoring, examination and re-adjustment based on the four so-called ‘pillars’ of priority
action:
•
improving employability – making sure people can develop the right skills to take up job
opportunities in a fast-changing world;
•
developing entrepreneurship – making it easier to start and run a business and to employ
people in it;
•
encouraging adaptability in businesses and their employees – developing flexible ways of
working to reconcile security and flexibility;
•
strengthening the policies for equal opportunities – equal access for women and men, equal
treatment at work.
The fact that there have been no policy initiatives in the area of industrial relations in the wake of
EMU largely reflects the view expressed in the previous chapter, namely that EMU is essentially
a monetary phenomenon. Implicit, however, is the assumption that the era of pay moderation will
continue. Schulten (1998) usefully summarises the line of argument as follows:
‘The EU Commission’s basic premise is that even under EMU the process of collective
bargaining and formulation of policy will, depending on national traditions, take place either at
national, regional, sectoral or company level ..... This constitutes an indirect but clear rejection of
all ideas of ‘Europeanisation’ of collective bargaining policy. Despite this, the various different
national systems for regulating collective bargaining policy would now have to take as their
framework of reference the macroeconomic policy defined by EMU and the monetary policy of
the European Central bank. From the point of view of the European Commission, this results in
three central requirements for future collective bargaining policy:
1.
nominal wage increases must be consistent with price stability;
2.
real wage increases with respect to productivity should take into account the need to
strengthen the profitability of investment and to support the purchasing power of wage
earners;
3.
collective agreements should better reflect, in a pragmatic way, productivity differentials
according to qualifications, skills, regions and, to some extent, sectors.’
Schulten goes on to clarify these points in the light of other European Commission documents.
The danger of inflationary pay settlements implied under point 1 is not given any great
probability. On the contrary, the Commission assumes that increased competition will intensify
‘wage and cost discipline’ and that the low inflation resulting from a hard-line monetary policy
14
on the part of the ECB will facilitate agreement on moderate and appropriate wage increases. In
the case of point 2, despite the apparent even-handedness between supply side and demand
considerations, the Commission seems to be clearly in favour of real pay remaining below the
level of productivity in order to encourage investment in job creation (EC, 1997; EC, 1998).
Indeed, the Commission believes that such an approach will achieve its full effectiveness under
EMU because its practitioners will ‘no longer risk seeing the job benefits of their moderation
undermined by currency appreciation relative to EMU partners’ (EC, 1998b). In the case of the
third point, the Commission advocates that the spread of pay for low skill jobs should be
extended downwards with any resulting poverty being dealt with in the form of negative income
tax (EC, 1998b).
European Union sectoral level
As the European Commission (EC, 1996a and b; EC, 1998a) reminds us, collective bargaining
developments at the European sector level are more embryonic than at the EU interprofessional
level. Even where the sectoral social dialogue is most developed, in those sectors where the EU
has an integrated industrial policy and where encompassing employer, as well as trade union,
organisation at European level exists, it deals largely with frameworks and statements of
principle. Elsewhere, such as in metalworking, where the absence of representative employers’
organisations willing to negotiate is regarded as the dominant factor, the sectoral social dialogue
has hardly taken off (see, for example, Keller and Sörries, 1998).
Even so, there is already evidence of bilateral and multilateral developments in those countries
within the ‘ Deutschmark zone’ in which negotiations in one country are taking account of wage
settlements in neighbouring countries in order to retain and enhance the competitive position of
‘national’ employers within product markets. The 1993-94 central agreement in Belgium opened
with a general clause drawing attention to pay developments in the Netherlands and Germany
(EIRR, 1992). Likewise, the 1994 Dutch metalworking agreements explicitly referred to pay
trends in Belgium and Germany (EIRR, 1994).
Most strikingly, the 1996 reform of bargaining arrangements in Belgium established a new
central structure which links, and constrains, the outcome of sectoral wage negotiations to wage
movements in its main trading partners, France, Germany, and the Netherlands (EIRR, 1996). In
the words of Fajertag (1997), ‘In this way, a “European wage area” has been de facto put in place
for the very first time’. Fajertag further argues that this decision could have the consequence of
encouraging the trade unions of the four countries to ‘hold specific meetings to exchange
information and to coordinate their wage bargaining strategies’. Indeed, Pochet (1998) suggests
that this is already happening following the bargaining coordination initiative launched by the
European Metalworkers’ Union (EMF) (see below) and the subsequent decision by IG Metall to
create regional bargaining cooperation networks with trade unions involved in metalworking
negotiations in neighbouring countries and regions for each of its bargaining regions.
In the case of Belgium, the Netherlands and the North-Rhine Westphalia region of Germany,
metalworking trade unions have developed a mutual exchange of observers at meetings
15
concerned with negotiations. In the 1999 negotiations in North-Rhine Westphalia, observers
from the Belgian and Dutch trade unions were also present at meetings with employers. Recently
the unions in the three countries have jointly appointed an official to develop the cooperation
further (Gollbach and Schulten, 2000). Cooperation arrangements between IG Metall regional
organisations and the Nordic metalworking trade unions in the northern coastal district and with
Austrian, Czech and Hungarian unions are also developing. The exchange of information and
practice involved could be seen as increasingly articulating the bargaining agendas of
neighbouring countries and regions around the focal point of Germany in the sector.
Also highly relevant to the subject matter of this report are the initiatives in two of our sectors,
automotive and finance, taken in the light of recent policy decisions by the European Trade
Union Confederation (ETUC) (for further details, see EIROnline, 1999/TN9907201S.html)).
‘The European industry federations have the primary responsibility for coordination in the field
of collective bargaining at the European level. It is therefore, in the first instance, up to the
respective federations to create the structures and instruments needed to achieve this in an
effective way’. (Towards a European system of industrial relations, adopted at the July 1999
ETUC Congress). In metalworking, which covers the automotive sector, the European
Metalworkers’ Federation has adopted a ‘coordination approach’, the basic idea of which is to
achieve European coordination of national bargaining policy through the definition of crossEuropean trade union bargaining guidelines and minimum standards. With the aim of preventing
possible downward competition on wages and working conditions, in December 1998, the EMF
adopted a so-called ‘European coordination rule’, according to which ‘the wage policy of trade
unions in all countries must be to offset the rate of inflation and to ensure that workers’ incomes
retain a balanced participation in productivity gains’. In addition, the EMF concluded a ‘working
time charter’ in July 1998, according to which working time in Europe should not exceed an
annual maximum of l,750 hours. This was the first time that European trade unions had been
able to agree on a self-defined European minimum standard.
In finance, in March 1998, the European regional organisation of the International Federation of
Commercial, Clerical, Professional and Technical Employees (EURO-FIET4) adopted a strategy
paper on Economic and Monetary Union: the impact on employment and collective bargaining,
which emphasises the need for European-level coordination of national, sectoral and enterprise
bargaining. In June 1999, the EURO-FIET position was further defined by the adoption of an
Action Plan for a new euro bargaining network which foresees the promotion of a coordinated
bargaining strategy at the level of EURO-FIET’s trade sections, which cover commerce, banking
and insurance, cleaning, etc. The aim, according to the plan, is to define common bargaining
targets ‘which should come out of existing best practices and, while aiming to provide European
coordination should also take account of national circumstances. For example pay targets could
offset the rate of inflation and ensure participation in productivity gains’.
4
16
In 2000 EURO-FIET became UNI-Europa following the merger of the international trade unions for finance/commerce,
telecommunications and the media to form the Union Network International (UNI).
Comparable developments have yet to take place in road haulage, which is our third sector. There
has, nonetheless, been considerable social dialogue activity in this sector and informal
coordination on the part of trade unions. Important considerations have been European
Commission initiatives to remove many of the restrictions on cross-national activity, including
cabotage (that is the system whereby hauliers from one country had to have a licence to operate
in another), plus the introduction of new regulations governing drivers’ hours (including
extending the main principles of the EU Working Time Directive). In the event, road haulage was
the one transport sector where it was not possible to reach agreement on the latter. As will be
discussed in Chapter 5, however, the experience appears to have had a significant impact on
many people’s thinking.
The Euro-company level
One reason for expecting MNCs to be the main focal point of any Europeanisation at Eurocompany level is the infrastructure of European Works Councils. As the review commissioned by
the European Foundation for the Improvement of Living and Working Conditions (Marginson et
al., 1998) reports, 386 agreements had been negotiated under Article 13 of the directive on
EWCs, with more so-called ‘voluntary’ agreements to come with the reversal of the UK’s ‘optout’. A further 121 EWCs had been established under Article 6 of the directive by late 1999
(Carley and Marginson, 2000). Altogether, some 1500 MNCs are reckoned to meet the directive’s
criteria for having an EWC. The expectation is that whatever else EWCs do they will be an
important vehicle for the exchange of information between employee representatives
(‘networking at management’s expense’ as one personnel director has put it (quoted in Hall et el.,
1995)). Thus, in its checklist for EWC representatives, the British TUC (1998) is suggesting that
the issues for discussion with colleagues might include the following:
•
To what extent are wage costs comparable between countries?
•
What are the non-wage costs (for example, benefits, subsidies, training)?
•
What scope exists for company-level bargaining in the various countries?
As yet, however, there has been little systematic research into the activities of EWCs. It is too
early to say, therefore, whether or not EWCs are engaging in the kind of cross-national activities
that are being recommended.
Conclusion
There would appear to be trends and developments in the processes of industrial relations
reflecting the introduction of EMU both within the six countries and at the three EU levels. In the
first case, EMU appears to be encouraging the rise in company bargaining at the same time as, in
some countries, it has been a major consideration in the emergence or re-emergence of ‘social
pacts’ or national incomes policies. In the second case, major programmes of coordination have
been launched covering two of the sectors, automotive and finance, to accompany developments
in employment and social policy at EU interprofessional level and the coming of EWCs at Eurocompany level.
17
Much less clear, however, is the impact and implications of these developments. Especially
unclear, for example, is whether company bargaining is supplementary to sectoral bargaining or
whether it is a substitute; whether the programmes of coordination launched by the EMF and
EURO-FIET have had any impact; and whether EWCs are beginning to play a major role in the
Europeanisation of industrial relations. Equally unclear, apart from moderation in pay rises, is
the impact that these developments are having on pay and employment. It is to these and related
issues that the report now turns, beginning with the analysis of the findings from the automotive
sector.
18
Chapter 3
The automotive sector: ‘coercive
comparisons’ take effect
The automotive sector is an important pillar of the economies of France, Germany, Spain, the
United Kingdom and, to a much lesser extent, the Netherlands. France and Germany are home to
significant indigenous automobile producers competing in the volume market for cars and light
commercial vehicles, all but one of which have major operations elsewhere in Europe. Spain and
the UK have no indigenous final producers of significant scale, but are hosts to significant
automobile manufacturing operations of companies based elsewhere in Europe, but also in North
America and Japan. North American producers have major operations in Germany also, and to a
lesser extent in France. The Netherlands is host to a joint venture owned by international
partners. The UK, along with France and Germany, is home to significant indigenous automotive
component suppliers of international scale. North American companies have a strong European
presence in this part of the sector too, and are represented amongst the case study companies in
the Netherlands and the UK. In Finland, the automotive sector is of only marginal importance to
the wider economy, and the relatively small indigenous producers represented by our case studies
each produces for specialist markets. None has production capacity outside Finland.
Overall, as Table 4 shows, total production of vehicles in EU member countries in 1998 exceeded
that of both the USA and Japan. Table 5 shows that EU production of both cars and commercial
vehicles suffered a sharp reverse in 1993, but had recovered 1992 levels again by 1995. The year
1998 was a record year for production of both types of vehicle.
Total employment, as Table 6 reveals, amounted to almost 1.9 million workers across the EU in
the automotive manufacturing part of the sector in the same year. Germany, with just over
800,000 employed in the sector, accounts for over 40 per cent of the total. France, the UK and
Italy each account for over 10 per cent of the total and Spain for about 8 per cent.
19
Table 4
International production of vehicles, 1998
Country
Cars
(in 000s)
European Union
USA
Japan
Germany
France
Spain
UK
Italy
Sweden
Belgium
Netherlands
Brazil
India
Korea
Commercial vehicles
(in 000s)
14,240
5,547
8,056
5,348
2,582
2,216
1,748
1,295
339
356
243
1,244
433
1,625
Total
(in 000s)
1,960
6,452
1,994
379
341
610
227
267
105
96
20
329
103
329
16,200
11,999
10,050
5,727
2,923
2,826
1,975
1,562
444
452
263
1,573
536
1,954
Source: SMMT.
Table 5
Trends in the production of vehicles in the EU, 1992 to 1998 (figures represent 000s)
Cars
Commercial Vehicles
Total
1992
1993
1994
1995
1996
1997
1998
13,386
1,742
15,128
11,404
1,313
12,717
12,798
1,578
14,376
13,258
1,817
15,075
12,551
1,755
14,306
13,234
1,931
15,165
14,240
1,960
16,200
Source: SMMT.
Table 6
Employment in automotive manufacturing in the EU, 1998
Country
Belgium
France
Germany
Italy
Netherlands
Spain
Sweden
UK
European Union total
Number of employees (000s)
54
278
801
203
n.a.
154
94
238
1,897
Source: Statistics of the Automotive Sector, 1998, CFCA (Eurostat).
The automotive sector is already a highly internationalised sector, with production of cars in
western Europe being integrated across countries by many of the major manufacturers well
before the completion of the EU’s single market at the start of 1993. Investment decisions by the
multinational companies concerned have long been mobile between sites in different European
countries, dependent to some considerable extent on comparisons of the relative performance of
sites. Labour factors have featured strongly in these comparisons. As the next section shows,
these developments have in turn brought pressure on the major components manufacturers to
internationalise their production systems.
20
The impact of EMU is likely to accelerate and intensify these internationalisation processes. One
result, as discussed below, will probably be further restructuring as the economies of scale
deriving from increasing internationalisation exacerbate the excess capacity that already exists in
the industry. The potential impact on employment in the five countries with significant
automotive production is amply illustrated below. A second consequence, in the face of
intensified management comparisons of working and employment practice across sites, could be
the growing use of cross-border comparisons by trade union representatives in enterprisespecific bargaining at national company and plant levels.
In each of the six countries, case studies were undertaken in two vehicle manufacturers (in
Finland and the Netherlands one of these was a truck manufacturer, elsewhere both cases were
major automobile manufacturers) and one component manufacturer (in Finland and Spain these
were tyre manufacturers). The sub-sector, market ownership and international reach of the
production operations – which varies from global to Europe – of each of the case study
companies are summarised in Table 7.
The changing economic context
Two features of the automotive industry in particular distinguish it from others. First, as the
market is mature there is only limited scope for growth. Indeed, the major manufacturers are
characterised by over-capacity – estimated at levels of up to 30 per cent in Europe (EC, 1997) –
and competitive pressures are particularly fierce. Second, the industry is highly internationalised:
competition is conducted very much on an international basis and multinational companies that
possess highly internationally integrated production chains dominate production. Aspects of
production, such as the platforms for car assembly and the manufacture of component systems,
are increasingly being organised on a global, rather than European, basis. The extent to which the
industry is ‘saturated’ and ‘global’ explains many of the distinctive features of the car
manufacturers, their suppliers and their relationships with dealers and other after-sales service
providers. Each of these is considered in turn.
The end-product manufacturers
The strength of the competitive pressures to reduce costs has led to a high degree of internal
restructuring within the large car manufacturers in recent years, much of which has been about
integrating their international operations. One aspect of this has been the move toward creating
highly integrated production processes in which plants operate to similar requirements. The
increasing homogeneity of production across borders has created scope for the multinationals in
the sector to share new technologies and practices across their operations. Accordingly, the
manufacturers have restructured their operations so as to facilitate a coordinated approach to
production. For instance, Ford has recently brought together its luxury brands into a new division
called the Premier Automotive Group, which includes Jaguar, Aston Martin, Lincoln and Volvo.
In other instances, manufacturers are developing partnership arrangements which involve
pooling their resources on particular projects. For example, PSA has partnership arrangements
with Fiat to produce a ‘people carrier’ and with Ford to produce diesel engines.
21
22
Table 7
Market, ownership and internationalisation in the automotive case study companies
Company
Company
Company
Finland
sub-sector
market
parent company
production internationalisation
Valmet Automotive
Luxury car assembly
Specialist
Finland
No, exports only
Sisu Auto
Trucks
Specialist
Finland
No, exports only
Nokian Tyres
Tyres
Specialist
Finland
Mainly exports
France
sub-sector
market
parent company location
Renault
Automobile manufacturing
Volume
France
Global
PSA Peugeot-Citroen
Volume
France
Europe (and L.America)
Valéo
Components systems
Major manufacturers
France
Europe and N. America
Germany
sub-sector
market
parent company
DaimlerChrysler
Volume
Germany (USA)
Germany and N. America
Volkswagen
Volume
Germany
Europe. N. America, L. America
Automotive Components
Components systems
Major manufacturers
France
Netherlands
sub-sector
market
parent company
Nedcar
Volume
Mitsubishi and Volvo (Ford)
Netherlands (Japan, Europe)
Scania
Truck manufacture
Volume
Sweden
Europe
Powerpacker
Components systems
Truck manufacturers
USA
Europe, N. America and Asia
Spain
sub-sector
market
parent company
Ford
Volume
USA
Global
SEAT
Volume
Germany
Europe, N. America, L. America
Michelin
Tyres
Major manufacturers, volume
France
UK
sub-sector
market
parent company
GM (Vauxhall)
Volume
USA
Global
Peugeot
Volume
France (PSA Peugeot Citreon)
Europe (and L.America)
Cummins
Engines
Trucks and heavy vehicles
USA
Country
The pressures to reduce costs have also led to threats of, and actual, plant closures. The most
noticeable incidence of this was Renault’s 1997 decision to close its Vilvoorde plant in Belgium,
and transfer the production concerned to plants elsewhere in the group. In the UK an atmosphere
of crisis surrounded Rover’s plant at Longbridge, which is owned by BMW, for much of 1999.
Despite reaching agreement with the government over a package of financial aid and agreement
with trade unions over a radical set of reforms to working practices and working time, the threat
to Longbridge’s future became very real with BMW’s announcement in March 2000 of its
intention to dismember Rover. The start of 2000 was also marked by speculation that Ford’s
announcement of a significant restructuring of its European car manufacturing operations
resulting in the end of car production at its plant in the UK. Indeed, reductions in employment
levels have been a feature of most of the motor manufacturers over the last two decades. The
context of uncertainty over the future of plants and over job security has enabled firms to bring
pressure to bear on workforces and their representatives to accept only moderate pay increases
and the introduction of new working practices. Thus there is considerable evidence that
management compare the performance of sites across borders according to their performance in
terms of costs and quality and tie these comparisons to investment decisions.
The context of over-capacity and severe cost pressures has led to a series of mergers,
acquisitions, joint ventures and strategic alliances, many of which have been international and
not confined to Europe. Since the beginning of 1998, Daimler and Chrysler have merged and just
recently have taken a 34 per cent stake in Mitsubishi, Ford has taken over the car division of
Volvo and Renault has acquired a 37 per cent stake in Nissan, whose main European
manufacturing operation is located in the UK. In March 2000, General Motors acquired a 20 per
cent stake in Fiat and Volkswagen a 34 per cent stake in truck maker Scania. These combinations
are invariably about cutting costs; the rationale for the Renault-Nissan deal, for instance, was that
costs had to be reduced at Nissan following losses in six of the last seven years. The significance
of these international tie-ups, of which there are likely to be more in the near future, is partly that
there are fewer manufacturers with each of these being larger and more globally spread. But the
significance also relates to the implications for the automotive component manufacturers.
The component manufacturers
The twin pressures to cut costs and achieve internationalisation have had severe repercussions for
suppliers in the automotive industry. Since a considerable proportion of the costs of the final
manufacturers are made up of bought-in components, it is inevitable that the cost pressures have
led to attempts to reduce the prices paid to suppliers. The Renault-Nissan tie-up provides a good
illustration since one-third of the promised cost savings are due to come from dealing with a
smaller number of suppliers and demanding lower prices from them, challenging the buyersupplier links that have been a key feature of the keiretsu. The introduction of the euro, by
making supply prices transparent, is widely anticipated to result in further pressures from the
manufacturers to deliver cost savings.
A particular twist to these pressures on suppliers in the UK comes from the exchange rate risk
arising from the UK’s non-participation in the euro. Before its pull-out announcement, BMW
23
confirmed at a meeting with the ten largest suppliers to its UK-based Rover subsidiary that
Rover’s suppliers would have to switch to euro-dominated contracts by the end of 1999. More
generally, suppliers in the UK are being asked by manufacturers to ‘share the pain’ of the upward
movement of sterling against the euro. The result could be a shift in sourcing to plants (quite
possibly owned by the same suppliers) within the euro-zone.
As well as suppliers being under ever-greater pressure to reduce costs, they are also under
pressure to internationalise themselves. End-product producers have moved towards dealing with
the same components manufacturers in different countries and demand an increasingly similar
component supply across their operations. In many cases this has involved orders being placed
with the HQ of the supplier who subsequently distributes the orders amongst its plants. Thus
many automotive components multinationals, such as Robert Bosch, GKN and Valéo, have
sought to standardise the nature of production across borders in much the same way as the final
producers.
A second consequence of the pressure from customers to internationalise is that many suppliers
have sought to increase their own international scope through engaging in mergers and
acquisitions, a recent example of which is TRW’s take-over of UK-based Lucas-Varity for nearly
US$ 7 billion. The rationale for this tie-up was that while TRW possessed expertise in steering
and suspension Lucas-Varity specialised in brakes, enabling the newly merged firm to offer
complete systems – or ‘modules’ – for the front of their vehicles. This reflects the preference
from the final producers to deal with a smaller number of suppliers, each of which provides a
range of components comprising a system, rather than buying a series of individual components.
Power-Packer provides another example of a components manufacturer that assembles systems
for final producers from individual parts whose production is outsourced to other firms.
A further consequence of the twin pressures on costs and to internationalise is that the
manufacture of some basic components which go to make up a system is being moved outside of
the European Economic Area. In some instances this is to the economies of central Europe, but
in other instances manufacture of such basic products as castings is being moved offshore, for
example to China.
Relations with dealers and after-sales services
A changing environment also influences the operations downstream from the end-product
manufacturers within the automotive industry. The network of dealerships, though formally
independent, is in fact under considerable control from the manufacturers, particularly in relation
to the prices they charge. In Europe, for the last decade and a half, car producers have enjoyed an
exemption from EU competition policy rules, allowing them to sell only through their own
dealerships, a system which has enabled them to charge significantly different prices in different
countries. The European Commission looks set to end this exemption in 2002, meaning that
independent dealerships and new developments such as on-line dealing could challenge the
existing pricing structure. The scope for consumers to shop around across Europe for lower
prices will be greater when the euro reduces the transaction costs of so doing and increases the
transparency of prices.
24
One response of the manufacturers to the challenges of the shake-up in pricing and distribution
has been to seek to offer a range of after-sales services themselves. Ford appears to have been in
the vanguard in this respect, offering an increasing range of after-sales services, increasing its
involvement throughout the life cycle of the vehicle. Thus Ford has acquired KwikFit in the UK,
a repair firm that has recently expanded into Europe; it has bolstered its own insurance services
and expanded Ford Credit, a finance provider; and recently it has acquired a recycling firm in
Florida. At the same time, Ford has indicated that it intends to make increased use of
subcontracting in manufacturing, outsourcing assembly functions for the first time. The
company’s new plant in Brazil is seen as the model that other plants will gradually follow.
Daimler-Chrysler has also indicated that the firm will shift into non-manufacturing activities,
including financial and computer services, aftermarket sales and vehicle servicing. Thus the
large manufacturers look set to increase their influence throughout a further part of the industry.
The practicalities involved in introducing the euro
Few of the case study companies had already made a full switchover to pricing, cost, budgeting
and internal accounting systems based in euros. An exception was DaimlerChrysler, which
switched over its internal budgeting and internal accounting systems on 1st January 1999. More
common is a phased transfer in which there is parallel budgeting, reporting and pricing, and
where different functions switch over to the euro at different dates. In some cases also, phasing
involves different parts of the business (country subsidiaries or product lines) switching over to
the euro at different times. The large manufacturers were not necessarily more advanced, in terms
of target dates for the completion of the switch over, than the components companies. Two of the
three case study companies in the UK (General Motors Europe and PSA) were actively involved
in the switchover plans of the parent company within Europe, whilst the third, Cummins Engines,
had made only very limited preparations for the euro (largely because the bulk of its European
business is outside the euro-zone).
Under phased approaches it would seem that priority is being given to companies’ external
interfaces with customers and suppliers. Thus General Motors (GM) Europe’s initial focus was to
ensure that all its dealers were ‘market ready’ by 1 January 1999 and would be able to transact
with their customers in euros during the transition period. Purchasing was also given priority.
Thereafter, internal changes to GM Europe’s systems and processes are being introduced
gradually throughout the transition period. The company’s guiding principle has reflected EU
policy of ‘no compulsion, no prohibition’, meaning that its businesses would be able to operate
in either euros or national currencies during the transition period.
At Renault, the initial phase of the switchover, as from1 January 1999, focused on relations with
third parties, enabling relationships with suppliers and customers to be denominated in either
euros or francs and providing for shareholdings to be priced in euros. The switchover of internal
systems for accounting, budgeting and personnel will not take effect until 1 January 2002.
Likewise, at PSA the switchover involves a two-stage process, in which dual pricing was
introduced from 1 January 1999 and quoted prices of shares on the stock exchange were
25
denominated in euros from the same date. Purchasing has involved a phased transfer in different
part of the group, so that as from 1 July 2001 all purchasing will be denominated in euros. The
second stage involving the switchover of internal systems is also being phased, with the targets
being budgets and accounts (1 January 2001), engineering, methods and production (1 January
2001) and personnel (1 January 2002).
According priority to external relationships in switching over to the euro was seen by
management respondents, but also by some works council and trade union representatives, as
reflecting the potentially significant effects on operations of the cost and price transparency
which the euro brings. For example, respondents at Volkswagen anticipated that, in conjunction
with potential moves to harmonise consumption taxes within the single market, pricing in euros
was likely to have a significant impact on margins in some national markets, and therefore
increase pressure on costs. In terms of possible effects on components suppliers, management at
DaimlerChrysler saw the greater price transparency afforded by the euro as enabling the
company to both reduce the number of suppliers across Europe and to decrease its reliance on
local suppliers. Respondents at Power-Packer, one of the component supply case studies, saw
price transparency as having a big impact both in terms of pressures on its costs from its large
automotive manufacturing customers and the pressure it could exert on companies supplying it
with parts for assembly into component systems.
To date, less attention has been given to personnel information systems. In all the case study
companies in the euro-zone, pay slips now give total net pay in euros as well as the national
currency. But in most of these the salary system has yet to be converted to euros, hence the
different elements (and deductions) comprising total net pay are still denominated in the national
currency only. This includes companies, such as DaimlerChrysler, which have already completed
the switchover to the euro for internal budgeting and accounting. Our Dutch and German
correspondents suggest that one factor lying behind such delays is that existing personnel
computing systems cannot easily be converted to euros and/or that companies may be
synchronising the introduction of new computer systems with conversion of personnel
information to the euro. Amongst the companies where this appears to be the case are the
Automotive Components company, DaimlerChrysler, PSA and Scania. A second factor is that
some national social security systems have yet to switch over to the euro, as is the case in France,
or that public authorities still require reporting on personnel and labour matters in the national
currency, as was the case in Germany in 1999.
Beyond this, the role of personnel and human resource departments in company programmes to
convert to the euro varies considerably. At both Renault and PSA the human resource function is
heavily involved in communication activities and in devising and providing training programmes
for staff affected. This is also the case at SEAT, which has followed guidelines laid down by
Volkswagen group management. Training activities include training for employees in accounting
and finance, employees in information technology, operators of machinery and robots and for
trade union representatives. Communication activity includes arrangements for the dual display
of amounts on pay slips, distribution of information on all matters that may affect employees and
26
the company, preparation of materials for and organisation of presentations to employees. In
contrast, amongst the three Dutch case study companies there appears to be relatively little
activity by the human resource function on communication and training.
Across the case studies in the five euro-zone countries, preparations for the introduction of the
euro tended to be regarded as a technical rather than as an industrial relations matter. Thus,
employee representatives had not been consulted about implementation of the euro, including
training and communication initiatives at SEAT or Ford (Spain) or Michelin. At both Nedcar and
Scania, neither management nor works council nor trade union representatives saw
implementation of the euro as being a matter that needed to be the subject of discussion between
them (unless the ‘rounding’ process was seen as disadvantageous for employees, in which case
compensation would be sought). There is, however, one important exception to the picture, and
this is the case study companies in Germany. Here a sectoral-level agreement providing specific
rules for rounding to apply to the conversion of Deutschmarks into euros was concluded between
Gesamtmetall and IG-Metall in the summer of 1998. (Subsequently, this was incorporated into
Volkswagen’s company agreement.)
Moreover, at both Volkswagen and DaimlerChrysler the works councils have been fully involved
in preparations for the implementation of the euro. At DaimlerChrysler, the works council has
played an active role in the communications programme within the company. Indeed,
implementation of the euro has been viewed as a joint project. A plant agreement on the
changeover was concluded in November 1998, and at the time of research discussions were
underway on converting clauses in plant agreements which stipulate specific Deutschmark
amounts. Elsewhere, collective agreements at sectoral, enterprise and plant levels appear so far to
remain unaffected. Whether, as attention turns to personnel systems, works councils and/or trade
unions in the companies in other euro-zone countries will become more engaged in
implementation of the euro remains to be seen.
Implications for the processes of industrial relations
As observed in Chapter 2, recent years have seen a growing decentralisation of collective
bargaining arrangements within the framework of sectoral agreements in four of the countries
studied. In Spain (with the exception of smaller automotive component companies) and the UK,
collective bargaining is focused at enterprise level. Yet at the same time new, European-level
industrial relations structures have been established in the shape of European Works Councils.
Moreover, our respondents report that there has been growing use of cross-border comparisons,
and emerging cross-border cooperation and coordination amongst trade unions and employee
representatives and employers’ associations and management, at both sectoral and enterprise
levels. Whereas bargaining cooperation involves cross-border exchanges of information between
the bargaining parties, coordination implies a more active policy of attempting to align
bargaining objectives and outcomes. The picture at sector level is presented first, before turning
to the developments at company level that the case studies revealed. Table 8 outlines the
collective bargaining arrangements in each of the companies and confirms whether or not a
European Works Council was present.
27
28
Table 8
Collective bargaining arrangements and EWCs in the automotive case study companies
Country
Finland
Collective bargaining
EWC
Scania
Metalworking sector agreement plus
additional plant agreements
EWC (1998)
SEAT
Company agreement
EWC (1992), WorldWC (1999)
UK
EWC
GM (Vauxhall)
Company agreement
EWC (1996)
Peugeot
Company agreement
EWC (1996)
France
EWC
Germany
EWC
Netherlands
EWC
Company
Sisu Auto
Metalworking sector agreement,
additional plant bargaining
No EWC
PSA Peugeot-Citroen
Metalworking sectoral and company
agreements
EWC (1996)
Volkswagen
Company agreement
EWC (1992), WorldWC (1999)
Company
Nokian Tyres
Rubber industry agreement
Under negotiation
Valéo
agreements
EWC as from 2000
Automotive Components
Metalworking sector plus additional
plant agreements
EWC (1995)
Powerpacker
Technical industries sector
agreement
No EWC
Michelin
Enterprise level agreements at
each plant
EWC (1999)
Cummins
Enterprise level agreements at
each plant
EWC (1999)
Spain
EWC
Company
Valmet Automotive
Metalworking sector agreement,
additional plant bargaining
No EWC
Renault
agreements
EWC (1993)
DaimlerChrysler
Metalworking sector agreement plus
EWC (1996)
Nedcar
Metalworking sector agreement, plus
EWC (observer to Volvo EWC)
Ford
Company agreement
EWC (1996)
Sectoral level
None of the metalworking sector agreements in the four countries concerned makes explicit
reference to levels of, or movements in, pay and conditions in other EU countries. Yet there is
some use of cross-country comparisons of pay and conditions by both employers’ associations
and trade unions. In the Netherlands, the employers’ association (FME-CWH) is well informed
about the terms and conditions of employment in neighbouring countries, and has developed
‘norm’ categories of employee as the basis for cross-country comparison of data. In addition, it
has established regional cooperation arrangements with its counterparts in Belgium and North
Rhine-Westphalia for exchange of data on wages, labour costs and productivity and regular
consultations on bargaining claims, the progress of negotiations and possible outcomes. These
arrangements, which were also acknowledged by the German employers’ association
(Gesamtmetall), reflect growing integration between the three economies concerned, and predate the introduction of the single currency.
Comparative data are deployed in negotiations by employers’ associations in other countries too.
The Finnish employers are currently resisting union demands for shorter working hours by
reference to working hours in other EU countries. All the employers’ associations participate in
the information exchange of collective bargaining data and the discussions of collective
bargaining developments, including the EMF’s bargaining coordination initiative, facilitated by
WEM. However, this EU-level cooperation between employers’ associations is somewhat less
structured and intensive than the regional coordination involving the Belgian, Dutch and German
employers.
On the trade union side, the most advanced developments involve confederations of unions and
individual unions organising in the metalworking sector from Belgium, Germany, Luxembourg
and the Netherlands. At a meeting in September 1998, these unions launched an initiative to
coordinate policy on collective bargaining. The stimulus came from concerns at both the low
level of settlements reached in recent bargaining rounds and, relatedly, to avoid competition in
wages and conditions between the countries concerned, which could arise if settlements undercut
each other. The meeting resulted in the adoption of a formula for bargaining objectives in
forthcoming wage rounds. The so-called Doorn Declaration, after the Dutch town in which the
meeting was held, commits negotiators to seek agreements that reflect the increases in the cost of
living and a balanced share in productivity improvements. In September 1999, the same unions,
meeting in Haltern in Germany, noted that settlements achieved in the 1999 bargaining round
meant that the Doorn formula had been adhered to (EIRO, 1999).
In keeping with the Doorn process, and also with the EMF’s bargaining coordination initiative,
the German metalworking union IG-Metall has launched an initiative to establish cross-border
regional bargaining networks for each of its regional branches. The aims of these regional
‘bargaining partnerships’ include regular exchanges of relevant information, organising joint
seminars between the unions concerned on collective bargaining issues, exchanges of observers
at meetings prior to and during negotiations and bringing a ‘European dimension’ to local
bargaining. Accordingly, the Dutch trade unions participate in a network with IG-Metall North
29
Rhine-Westphalia and the Belgian trade unions, attending meetings preparing claims and
negotiating sessions (as observers) in each of the other two countries concerned. In 2000 the
Dutch and German unions aim to go a step further, synchronising their bargaining demands and
the bargaining process. The British AEEU has participated in an initial meeting of a regional
partnership with IG-Metall Lower Saxony, and further activity is likely to follow. Whereas the
first of these could be said to involve bargaining coordination, the second is at present focused
on developing bargaining cooperation.
There is some suggestion from our German correspondent that IG-Metall sees the process in
asymmetrical terms, with coordination developing around its own bargaining objectives rather
than the other way round. Indeed, in developing its own bargaining demands in both 1999 and
2000, IG-Metall has stated that it has a particular responsibility, given the likely impact of the
German sectoral agreements elsewhere in the euro-zone. Recent statements from the European
Central Bank would seem to reciprocate the notion that the metalworking settlement in Germany
is seen as a pacesetter for those in other countries (‘German pay claim hits bond markets’,
Financial Times, 12 January 2000).
Elsewhere, the Finnish union Metalliliitto notes the importance of long-established arrangements
for information exchange and cooperation between the Nordic unions, but notes also that with
the coming of EMU Sweden’s traditional role as leader is being questioned. The French CFDT
reports that it makes regular use of comparisons of pay, unit labour cost and working practices in
negotiations in other EU countries. The role of the EMF in facilitating exchanges of data relevant
to collective bargaining is underlined by unions in several countries.
This synthesis of developments across the six countries suggests differences in the extent and
intensity of bargaining coordination on the parts of both the employer and trade union. First,
whilst bargaining cooperation in the form of cross-border information exchange is developing on
either side of the bargaining table, steps to coordinate bargaining policy and outcomes appear to
be confined to the trade union side. Second, both bargaining cooperation and bargaining
coordination are more intense in particular regions than across the EU as a whole. This is most
evidently the case for the Benelux countries and the North Rhine-Westphalia region of Germany,
but also amongst the Nordic countries. Third, the problem of meshing different bargaining
systems means that countries where bargaining is focused at enterprise level, such as Spain and
the UK, are less engaged in such sectoral level coordination initiatives.
Looking to the future, the development of European-level structures for collective bargaining in
the sector was seen as being rather unlikely by both employers’ associations and trade unions in
the six countries. Beyond this, perspectives on future developments differed markedly between
the bargaining parties. Employers’ association representatives tended to observe that greater
coordination of national bargaining across countries was at odds with the tendency for greater
decentralisation within these national structures. Employers favour developing greater scope for
bargaining at the enterprise level, although both Gesamtmetall and the Finnish MET emphasised
the benefits of further decentralisation occurring within the framework of sectoral agreements.
30
Several employers’ associations, including Gesamtmetall, remain resolutely opposed to opening
up social dialogue at the European level with the EMF. The Dutch FME-CWM, however, expects
that consultations with trade unions at European level will develop in some form in the future.
One possibility is of national agreements containing provisions that embody European minimum
standards on wages, working hours and working conditions, thereby putting a floor under
competition between employers.
Trade unions, in contrast, favour the development of a European social dialogue within the
sector. Some unions, such as the Dutch FNV, expressed the view that this might be more feasible
at sub-sector level, focusing, say, on the automotive or aerospace segments of the sector. The
different pay levels, working time arrangements and working practices prevailing in different
countries are seen to be a factor in competition which further decentralisation may exacerbate. In
the face of such developments, trade unions need to further develop cross-border coordination.
Whilst unions across the six countries support the EMF’s bargaining coordination rule, there are
reservations about passing a bargaining mandate to the EMF. The Dutch, Finnish and German
unions all expressed concern at the consequences of bargaining moving away from the national
sector level, where unions are most strongly organised, to the EU sector or euro-company levels.
Practical difficulties of three kinds in intensifying coordination are also foreseen. The first,
identified by the Dutch FNV, is the problem posed by different taxation, social security and
national insurance schemes. The second, underlined by the AEEU, is the challenge of meshing
different, sector- and enterprise-based, bargaining systems. The third, identified by Metalliliitto,
is whether productivity developments at sectoral, national or EU level should be the reference
point for the productivity dimension of the bargaining rule.
Company level
At enterprise level, agreements making explicit reference to economic or industrial relations
indicators in other countries are rare. A notable exception is the 1998 three-year agreement
covering pay, employment security and flexible working practices at General Motors’ Vauxhall
subsidiary, one of our UK case studies. A novel element of the settlement was that part of the pay
rise due in the third year is made contingent on sterling falling below a specified level against the
Deutschmark. The rationale was that a fall in the exchange rate allied to cost savings deriving
from new working practices would make Vauxhall more competitive in relation to GM’s Opel
subsidiaries elsewhere in the EU.
The logic of internal competitiveness which also underpinned the three-year ‘package deal’ at
GM Vauxhall constitutes a more implicit European dimension to collective bargaining, which is
widespread in the local plant and company level negotiations over working practices, working
time arrangements and company specific pay within the internationally integrated automotive
manufacturers. This implicit European dimension derives from management’s use of
comparisons of labour costs and labour performance across plants in different countries in
decisions on investment, relocation or reallocation of production, and divestment or closure.
Commenting on the intensive use of data to compare labour costs and productivity at Nedcar, our
31
Dutch correspondent remarks that ‘such [international] benchmarking has become a way of life
in the automobile industry’. Of note is that the use of such cost and performance comparisons
was widespread before EMU, being driven by the restructuring and rationalisation accompanying
growing European integration.
Crucially also, the reference points are increasingly global rather than confined to Europe,
reflecting the growing international integration of production by the major manufacturers. This
was the case at Renault, Ford, GM, VW and Nedcar (where the reference points were plants
belonging to the joint venture partners Mitsubishi in Japan, Volvo in Europe – and since the
latter’s acquisition by Ford, Ford’s operations at Cologne and Genk). In a global context, the
major differences in labour costs were said not to be within the EU but between the EU and
central and eastern Europe and Asia. In the components part of the sector, cross-country
comparisons of costs and performance are evident if not as intensive. Michelin and Valéo
regularly benchmark their European plants against each other. At Cummins UK subsidiary, the
reference points for comparisons are plants producing similar products in the USA. Sisu Auto
and Nokian Tyres in Finland would appear to make less use of international comparisons, mainly
because the key negotiations take place at the sectoral level.
In the context of ongoing decisions on the location of investment and production, these
comparative data are deployed ‘coercively’ by management in bargaining at plant and company
level within the different countries to secure changes in working practices and working time
arrangements from local workforces against commitments to future investment and production
allocation. The use of ‘coercive comparisons’ by management in local negotiations is well
illustrated in the case of GM Europe. In the wake of an international benchmarking exercise
involving all of GM’s European plants, and in the context of an announcement of major
workforce reductions in the company’s global operations over the coming f ive years,
management at the Opel subsidiary in Germany concluded an agreement with the works councils
which traded radical changes in working practices and reductions in company-specific payments
against a promise of future investment. This was followed by parallel agreements first in
Belgium and subsequently in the UK which involved flexibility and other measures aimed at
reducing costs and enhancing productivity against commitments on future production and
investment. The process was, in effect, a cross-border round of concession bargaining driven by
coercive comparisons of costs and performance.
Where pay bargaining is focused at enterprise level, the use of comparative data on pay levels is
less evident. Management (and union) representatives at Peugeot’s UK subsidiary underlined the
difficulties posed by the different payment structures, and tax, national insurance and social
security systems, in France and the UK, in comparing levels of pay. Pay is seen as one variable,
along with working practices and working time arrangements, which determine the performance
of the UK production operation against the benchmarks used by the parent group. This was
equally the case at Ford in Spain.
Whilst the operations of the large automobile manufacturers were already well integrated at
European level ahead of EMU, in some of the case study companies the further economic
32
integration within the EU which is signalled by EMU has stimulated management reorganisation
aimed at securing a closer integration of operations across Europe. The Automotive Components
case in Germany and Scania are two such examples. An exception to this development was
DaimlerChrysler, where operations elsewhere in Europe are relatively marginal and where there
is little cross-border coordination on the management (or employee) side. Closer integration of
management structures across Europe is reflected in some cases by active coordination of
personnel and industrial relations at European level. The most advanced instance amongst our
case studies appears to be VW and its SEAT subsidiary. Personnel and industrial relations
managers from across the VW group within Europe regularly meet with, and contact, each other
in order to discuss collective bargaining developments and problems, exchange information and
experiences and coordinate management initiatives and responses. In Spain, SEAT’s overall
personnel strategy is shaped by VW’s recommendations and guidelines.
The use of cross-country comparisons by trade unions and works councils in company and plant
level negotiations appears to be less well developed than on the management side. Nonetheless,
there is some evidence of this occurring. At Renault and PSA, CFDT representatives make use of
enterprise-level comparisons of productivity, wage costs, working time and conditions in other
countries. At Peugeot’s UK operation and Ford in Spain, union representatives use comparisons
with other company plants in negotiations over working practices.
Where negotiations are solely enterprise-based, union representatives argued that comparisons of
working time are easier to draw than comparisons on pay (where the picture remains confounded
by differing payments systems and fiscal and welfare regimes). Accordingly, at Peugeot’s UK
subsidiary the unions have lodged a claim for a reduction in working time following the
conclusion of an agreement in France implementing the 35-hour week in the PSA group. At GM
Vauxhall, international comparisons have been successfully used to secure a reduction in
working time, first in 1995 and subsequently in 1998. At SEAT, trade union representatives are
focusing on comparisons of working time, especially with VW’s operations in Germany. On pay,
however, reference points tend to remain national. In both Spain and the UK union
representatives (and also management) said that the main reference points in company pay
negotiations were developments elsewhere in the sector within that country.
The use of cross-border comparisons by, or indeed cross-border contacts between, trade union
and employee representatives were rather less evident amongst the components manufacturers.
For example, no such cross-border dimension to trade union or works council activity was
evident at either Power Packer or Cummins. The same held for the three specialist producers
studied in Finland.
An important element of the social dimension accompanying economic integration within the
EU has been the adoption of the EWCs directive. As shown in Table 8, whilst EWCs were
universally present amongst the large automobile manufacturers, this was by no means the case
for the components suppliers where EWC coverage is patchy.
33
Perspectives varied on the potential offered by EWCs to facilitate and develop information
exchange and bargaining cooperation amongst employee and trade union representatives across
plants within Europe. Union representatives at Renault and PSA underlined that the purpose of
their respective EWCs was to develop social dialogue, a view shared by management
representatives at the two groups. Nonetheless, the strengthening of the PSA EWC by the
creation of a smaller steering group which would meet more regularly was seen as important to a
more regular exchange of information between employee representatives. Employees at Nedcar
had an observer on Volvo’s EWC, which was seen as a focal point for the exchange of
information between representatives from operations in different countries. However, its
influence was compared unfavourably with that of a cross-border committee that was the
forerunner of the EWC. Trade union representatives on GM Europe’s EWC have organised a
systematic collection and exchange of industrial relations data from the company’s plants across
Europe. In contrast, at DaimlerChrysler the influence of the EWC was seen as minimal with the
dominant co-ordinating role being played by the German group works council.
The German works council representative at VW saw the EWC (and the World Works Council)
as playing an important role in establishing the ‘rules of competition’ between plants within a
highly integrated international group. Such ‘rules’ include a balanced distribution of any
workforce reductions and avoidance of plant closures. However, a Spanish counterpart from
SEAT reported that reconciling differing employee interests was proving difficult. In similar
vein, the development of a coordinated approach by employees in the face of internal
competition between plants was reported to be difficult at Ford’s EWC, in part because dominant
delegations from Germany and the UK were perceived to be pursuing national interests.
For their part, management respondents in some companies, including GM Europe and Michelin,
saw the information on business plans and strategy that EWCs would provide as being of
considerable potential value to employee representatives. But generally management did not
anticipate EWCs becoming a vehicle for European-level collective bargaining activity. A partial
exception is VW, which envisaged that its EWC might have a specific role in relation to some
European-wide personnel issues, such as pension funds.
The impact on employees of growing global integration of production by several of the major
automobile manufacturers is highlighted by the formation in 1999 of a World Works Council,
with a similar remit to the EWC, at VW, and by increasing international contact within Renault
between trade union representatives in Europe, North America and Japan.
At enterprise level also, variations in the intensity and extent to which cross-border comparisons
are being deployed and in which bargaining cooperation on the employee side is being developed
are evident. First, in contrast to the sectoral level, employers are noticeably more active in
systematically using cost and performance comparisons in local plant and company negotiations
than trade union and works council representatives. Second, cross-border activity is more evident
on the part of both bargaining parties in the highly integrated large automobile manufacturers
than amongst the components suppliers. Although frequently the latter are European in the scope
34
of their operations, this may be because individual sites supply the European market with
particular products that are less susceptible to comparisons with each other. Third, the scope of
the market in which producers are operating appears to be a further salient factor, with
international comparisons playing role in the case of specialist niche players.
Fourth, there is variation according to how far a company’s operations are concentrated in one
country or how far they are spread across Europe. Thus, international comparisons and
coordination play a much more prominent role at VW for both management and employee than
they do at DaimlerChrysler, which in terms of its European operations is still concentrated in
Germany. A similar contrast applies in the automotive components part of the sector, between
Valéo and the Automotive Components case in Germany, whose operations are spread around
Europe, and the north American companies Cummins and Power Packer whose European
operations are concentrated in, respectively, the UK and the Netherlands.
Over the medium-term, the prospect of European-level company agreements was for the most
part seen to be remote by both management and trade union representatives. This included the
cases in Spain and the UK where collective bargaining is entirely enterprise-based. At VW,
however, company-specific European framework agreements laying down guidelines on aspects
of employment practice were seen to be a possible development. At VW also, management saw
EMU as opening up the possibility to deal with a few European-wide personnel issues, such as
pension funds, through consultation at the level of the European Works Council. At Michelin,
further EU-level regulation was expected which it was anticipated might enhance the role of the
EWC. Elsewhere, at Ford, Renault and PSA respondents did not expect EWCs to develop a role
in collective bargaining.
However, management and trade union and works council representatives in several of the
companies concurred that future negotiations at enterprise-level were likely to see increased use
of cross-border comparisons by either side. Company-level agreements would be more and more
influenced by what is concluded elsewhere in Europe.
Conclusion
A strong decentralising trend towards greater scope for collective bargaining at enterprise level,
particularly over working practices and working time arrangements, is evident across the
automotive sector. At the same time, there is growing evidence of the use of comparative data in
national and local negotiations and of forms of cross-border bargaining cooperation and
coordination. In the context of this dual dynamic of increased decentralisation and growing
Europeanisation, a distinct asymmetry is evident between employers and trade unions both in
future perspectives and in the focal points of coordination.
Employers’ association, management and trade union representatives concur that, for the
foreseeable future, European-level collective bargaining structures for the metalworking sector
which mirror those found at national level in many EU countries are an unlikely prospect. Yet,
35
whilst employers’ associations and company management tend to emphasise the benefits of
further decentralisation towards the enterprise level, trade union representatives underline the
need for coordination of bargaining agenda, objectives and outcomes across borders in order to
minimise the scope for damaging cross-country competition in terms and conditions of
employment.
Amongst employers, coordination is most strongly developed at the enterprise level, where the
internationally-integrated MNCs which dominate the sector routinely deploy the results of
international performance comparisons across sites to secure the implementation of productivityenhancing changes in working conditions and practices in largely local, but also national
company, level negotiations. Employers’ associations are for the most part hostile to, or reluctant
to engage in, coordination of bargaining agenda and outcomes at sectoral level. In contrast, on
the trade union side, initiatives aimed at bargaining coordination are most developed at sectoral
level. At enterprise level, activity by trade unions and/or works councils appears to be largely
confined to bargaining cooperation, involving the exchange of information on matters that are
the subject of local bargaining.
The extent and intensity of bargaining cooperation and coordination at sectoral and enterprise
levels also varied. At the sectoral level, bargaining cooperation and coordination appear to be
most developed within particular regions of the EU, notably between the Benelux countries and
North Rhine-Westphalia in Germany, where it pre-dates EMU in the case of employers. It is also
more evident in the automobile manufacture part of the sector than in components. At enterprise
level, a similar difference was evident between companies in the two parts of the sector but
beyond that the intensity of cooperation and coordination appears to vary according to the type
of company concerned.
Implications for pay and employment
Employer and trade union representatives saw any impact of EMU on pay and employment in the
automotive sector across all six countries as being primarily indirect. This section considers in
turn the potential impact of EMU on wages, on payments systems, on working time and on
employment.
Wage trends in the sector in each of the six countries were seen by representatives of both
employers and trade unions as continuing to be mainly shaped by national considerations. These,
however, included the stabilisation policies adopted by national governments and the social pacts
concluded between some national governments and the social partners in order to comply with
the convergence criteria for EMU. The influence of the former was specifically identified by our
Spanish correspondent, whilst the influence of the latter was described by our Finnish
correspondent. Insofar as a common monetary policy brings convergence of inflation rates
within the euro-zone, this indirect influence of EMU on the cost-of-living dimension of wage
developments will become an enduring feature of pay settlements in the five countries within the
euro-zone.
36
Beyond this, both employer and trade union representatives universally saw common pay
outcomes in terms of wage levels as being a long way off. Payments systems differ across
countries, but probably more importantly there are considerable differences in social security,
national insurance and taxation systems, which in addition to negotiated wage rates also
determine take-home pay. In this context, the views of the UK employers’ association
representative capture a more widespread perception: ‘It’s more difficult [under the single
currency] than five years ago to counter comparisons, but still pretty easy for companies [and
employers’ associations] to justify differences to employees’. Only in the event of the EU
adopting a common social security, national insurance and taxation regime did either employer or
trade union representatives consider that common wage outcomes were a possibility. For the time
being, any convergence pressures on pay were thought most likely to be felt in low wage areas of
the euro-zone. For example, at GM it was said that such pressure might be anticipated from its
Portuguese operation.
Differences within the sector were evident too. Whilst managers and union representatives in
several of the major automobile manufacturers had reflected on the potential for convergence in
wage developments, the possibility appeared to have barely surfaced in the components part of
the sector where respondents on both the management and trade union side offered few
comments on this question.
Employer and trade union representatives across the six countries expect EMU to have little
impact on payments systems and on the spread of variable pay schemes such as performancerelated pay. In the UK the view was expressed that performance-related pay schemes tended to be
introduced and refined in the British operations of multinational companies before being
diffused in other European countries. Whilst at VW it was suggested that the closer integration of
operations that EMU is further driving forward might lead to harmonisation of payments systems
across the group.
Unlike pay outcomes, comparisons of working time, and of working time arrangements, are more
straightforward although again the influence of EMU is indirect. In the words of a UK union
official ‘working time is a good shared objective – time has the same value in all countries’.
Reference has already been made to the union claim for a shorter working week at Peugeot’s UK
subsidiary in the wake of the parent company’s agreement with French trade unions
implementing the 35-hour week. The more immediate potential for comparisons of working time
was recognised by employer representatives too. As noted above, the Finnish employers are
resisting the current claim for shorter working hours by reference to working time in other EU
countries. At the Automotive Components case in Germany our correspondent reports that
management have had an exchange of experiences with their French counterparts over
implementation of the 35-hour week. Management also compares working time arrangements: at
both Ford (Spain) and SEAT management is looking to increase Saturday working, something
which has been secured at plants owned by the parent groups elsewhere in Europe.
Turning to employment, the restructuring and reorganisation that are a consequence of evercloser European integration were seen to be further exacerbating overcapacity in the automobile
37
manufacturing part of the sector. At the same time, management representatives underlined that
this was a global problem, and not one confined to Europe. As a result of overcapacity,
significant reductions in numbers employed over the next few years are anticipated, although
their distribution between the major producers will be uneven. PSA Peugeot-Citroen, for
example, has achieved record levels of production over the past three years and a growing share
of the European market. In contrast, reports that Ford considers that it has one European
production plant too many has created uncertainty throughout its operations.
Within the major producers, both management and trade union (and works council)
representatives were acutely aware that employment prospects at the case study locations would
be crucially shaped by decisions by group management on where to locate new models and
therefore investment. Competition for future investment along two dimensions was seen as likely
to intensify even further. The first is the threat to close or scale down particular operations unless
the workforce agrees to changes in working and employment practice, as existing facilities
compete for new investment. The second is competition between different labour market
systems, so-called regime competition, to attract new investment projects. Here substantial
labour cost differentials between central and eastern European countries and the EU were seen by
respondents at both DaimlerChrysler and VW as likely to attract new investment projects to
central Europe.
Furthermore, the greater price transparency afforded by the euro was expected to bring further
pressure on producers and on components suppliers to drive down costs. Our German
correspondent reports that this was leading the case study companies, and VW in particular, to
search for a new relationship between costs and performance in operations in Germany.
In automotive components, restructuring in the light of European economic integration, but also
as a result of innovations in production systems and technology, was expected to result also in
reductions in numbers employed. In addition, the production of low value-added, simple parts, to
be subsequently incorporated into components systems, was being outsourced at both Power
Packer and Valéo. The expectation was that production would shift to lower labour cost locations
in central and eastern Europe.
38
The finance sector: national and
international developments
Chapter 4
The finance sector, like the automotive sector, accounts for a sizeable amount of employment in
each of our countries. Indeed, it is a much larger employer. An indication of the significance of
the finance sector is provided by the special breakdown of Community Labour Force Survey
figures for 1996 produced by Eurostat. As will be seen from Table 9, over five million people
were employed in banking/f inancial services and insurance throughout the EU. In
banking/financial services, the UK had the highest proportion of its working population involved
at 2.7 per cent and Spain the lowest at 0.9 per cent. In insurance, Germany had the highest at
0.7 per cent and Finland and the UK the lowest at 0.3 per cent.
Table 9
Proportion of the population of working age (15-64) in the finance sector, 1996
Country
Finland
France
Germany
Netherlands
Spain
UK
EU (15)
Banking & financial services
Insurance
%
Nos. (000s)
%
Nos. (000s)
1.1
1.4
1.6
1.6
0.9
2.7
1.6
33,840
517,552
880,672
168,144
237,177
1,012,797
3,934,832
0.3
0.5
0.7
0.5
0.4
0.3
0.5
11,520
184,846
385,294
52,545
105,012
112,533
1,229,635
Source: (EC: 1997) Employment in Europe, 1997.
The finance sector is also highly concentrated in two important aspects. Not only are there a
small number of dominant players in each of the six countries, but these are substantial
employers, as Table 10, which introduces our case study companies in the sector, clearly shows.
39
In Finland, for example, our case studies include MeritaNordbanken and Leonia Bank, which are
two of that country’s three major banks. In France, all three of our companies, Credit Lyonnais,
Société Générale and AGF, are major players in their respective fields. In Germany, Deutsche
Bank, Commerzbank and Dresdner Bank dominate private banking. In the Netherlands, ABN
AMRO and the ING Group are two of the largest financial service organisations in the world. In
Spain, Banco Santander-Banco Central Hispano is one of the two groups now dominating retail
banking. In the UK, HSBC (Midland) and NatWest, along with Barclays and Lloyds-TSB, have
long been the dominant forces not only in retail banking but also increasingly in financial
services generally.
Even so, the finance sector has yet to achieve the same levels of internationalisation as the
automotive sector,. True, there have been significant moves in that direction in recent years.
Some parts of the sector, such as investment banking, are global. Retail banking in particular,
however, where the bulk of employment is to be found, along with collective bargaining, remains
essentially domestic, as does much of the insurance industry that makes up another significant
component. Certainly there is nothing like the level of homogenisation of products of the
automotive manufacturers or the integrated production arrangements that accompany them.
Although there is much talk about the emergence of genuinely pan-European f inancial
organisations, for the moment these domestic considerations are the dominant concerns above all
in retail banks.
Some strong national contrasts also remain to complicate an understanding of general trends and
developments, reflecting the very different historical development of the sector. In some
countries, notably Finland, France and Germany, the state continues to have a strong involvement
(although this is declining in Finland especially), including a separate sectoral collective
agreement in Germany covering savings banks. In Spain, savings banks such as La Caixa, in
which employees are represented on the governing board, also retain a strong presence and have
their own sectoral agreement. In the UK, so-called ‘mutual’ societies, in which all account
holders have a share in ownership, occupy a similar position in housing mortgages and insurance
– some, such as the Nationwide, also having moved into banking following deregulation.
As will be described in more detail in the next section, the creation of the single currency and the
emergence of a new euro capital market directly affect the finance sector. Complicating matters,
however, is that the current and future changes that EMU brings come on top of a number of
other developments that are transforming the face of the sector almost beyond recognition. New
players have emerged in the form of supermarkets providing a range of financial services
including loans as well as cash-back facilities. New forms of product and service delivery such
as the telephone and the Internet have been developed, by old and new players alike, to challenge
the long-established high street branch and the insurance agent. The traditional barriers between
businesses within the sector have also been breaking down. Investment banking and retail
banking have been brought together in many companies, while the dividing line between banking
40
and insurance is disappearing as the so-called bancassurance concept finds favour in others.
Overall, it is no exaggeration to say that the nature and extent of the changes in the sector in
recent years has been unparalleled in its history.
Along with the deregulation of the sector, which has been a major feature in the 1980s and 1990s
throughout EU countries, two main considerations lie behind these developments and deserve
our attention. One is new technology, where EMU has had virtually no impact. The other is an
intensive process of mergers and acquisitions that has left no EU country untouched. Here the
impact of EMU varies from case to case, being important in some and negligible in others.
Rarely, however, has it been the only consideration.
New technology
In the words of researchers from the UNIFI banking union in the UK, reviewing the way ahead
for the finance sector,
‘It is hard to overstate the impact that technology has had and is going to have on employment.
There has already been a shift from the branch networks of banks and the door-to-door sales force
of insurance companies to call centres and centralised departments. The introduction of ATMs
[automatic cash machines] and point of sale technology has also had an impact on cash handling
jobs and on the numbers of customers that go into bank branches. This will be exacerbated by the
introduction of smart cards that can be used instead of cash. Manual processing roles have also
been automated reducing the number of jobs in these areas. The effects of technology have not
been limited to lower grade jobs. Applications for loans, mortgages and other products are now
credit scored through computers reducing the need for managers.
No part of the finance sector has been untouched by technology and the pace of change as a result
of technological developments is showing signs of speeding up rather than slowing down.’
(UNIFI, 1999)
The Internet is perhaps the most dramatic illustration of this last point.
Coupled with deregulation, new technology has made it possible for new entrants, such as
supermarkets, to break into the sector as well as enable existing players to introduce new modes
of delivering products and services. For example, the growth in telephone services has led to
significant changes in the way that both banks and insurance companies are organised and in the
way that they relate to their customers. In most countries, many retail banks can now offer
routine banking services such as arranging direct debits by telephone, dealing with these
inquiries from call centres rather than from a particular branch.
The impact on employment structures has been dramatic. In Finland, where the deep recession
and banking crisis of the early 1990s were additional dimensions, the number of employees in
banking was halved during the decade. In the UK, the number of branches has declined, while
employment in call centres has grown significantly to around 390,000 people, a substantial
proportion of which is in the financial sector.
41
42
Table 10
Market, ownership and internationalisation of the finance case study companies
Company
MeritaNordbanken
12,000 (Finland)+6,000 (Sweden)
Banking and insurance
Finland-Sweden
Finland-Sweden-Denmark
Credit Lyonnais
31,800 (46,300 worldwide)
Banking
International
France
Deutsche Bank
48,700 (75,000 worldwide)
Banking (retail & investment)
International
Germany
ABN-AMRO
97,000 (107,000 worldwide)
Retail & investment banking
International
Netherlands
Banco Santander Central-Hispano
45,000 (106,000 worldwide)
Banking, finance, insurance
International
Spain
HSBC (Midland)
42,000 (100,000+ worldwide)
financial services (banking)
International
UK
Company
Leonia Bank
4,700
Banking
Finland
Finland
Société Générale
46,600 (58,600 worldwide)
Banking
International
France
Commerzbank
32,600 (34,400 worlwide)
International
Germany
ING Group
33,5000 (86,000 worldwide)
Financial services
International
Netherlands
Banco Popular
11,600
Banking, finance, insurance
Spain
Spain
Legal & General
9,500 (10,800 worldwide)
financial services (insurance)
mainly domestic
UK
Company
Pohjola Insurance
2,800
General & life insurance
Finland-UK-the Baltic states
Finland
Assurances Générale
18,500c (30,000 worldwide)
Insurance
International
Germany
Dresdner Bank
47,000 (48,000 worldwide)
International
Germany
Bouwfonds
1,100
Property finance & management
Domestic
Netherlands
AXA
2,000 (88,000 worldwide)
General & life insurance; financial
International
France
NatWest
57,000 (62,000 worldwide)
financial services (banking)
mainly domestic
UK
Country
Finland
no. of employees
sub-sector
market
France
no. of employees
sub-sector
market
Germany
no. of employees
sub-sector
market
Netherlands
no. of employees
sub-sector
market
Spain
no. of employees
sub-sector
market
UK
no. of employees
sub-sector
market
Significantly, too, the technology has made it possible for established companies to make a fresh
start, either in terms of location or organisational structure, which has had the most profound
implications for the processes of industrial relations and pay and conditions of employment more
generally. Our three cases studies from Germany, Deutsche Bank, Commerzbank and Dresdner
Bank provide a good illustration. In recent years, each one of them has set up so-called ‘direct’
banks with their associated call centres. Instead of being kept within the existing organisation,
however, each has been established as an independent entity with substantial numbers of
employees finding themselves being transferred from the old to the new company. As will be
discussed in more detail later, in each case, a major reason for establishing these ‘direct’ banks as
independent organisations has been so that they could ‘escape’ the coverage of the national
sector agreement.
It seems likely that the impact of the Internet will be even greater. Indeed, the signs are that it is
even likely to check the growth of telephone banking, reflecting the much lower costs of on-line
transactions, which is estimated to be about one-tenth that of the telephone equivalent. According
to a recent report in the Financial Times (10 January, 2000), there are already around 1,000
financial services companies operating on the Internet in Europe, with one of our Finnish cases,
MeritaNordbanken, being the third strongest Internet bank brand after Citibank of the USA and
Swedbank of Sweden. Almost every day brings a report of yet another major company making an
investment in new Internet ventures. The latest include two of our case studies, HSBC (Midland)
in the UK and Deutsche Bank in Germany. In the latter case, this involves 1 billion euro a year
joint ventures with Europe’s largest software group (SAP) and AOL Europe (the AOL and
Bertelsmann operation) (The Guardian, 22 February 2000).
Mergers and acquisitions
In most European countries, a wave of mergers and acquisitions in both banking and insurance
lies behind the changes in the shape, size and business portfolios of many companies. At the risk
of over-simplification, four main trends may be observed:
•
mergers between banks in the same country;
•
mergers between insurance companies in the same country;
•
mergers between banks and insurance companies in the same country;
•
mergers involving one or other of the above three types across borders.
Some illustrations will help to clarify this.
•
In Finland, each of our three case studies, the MeritaNordbanken, Leonia Bank and Pohjola
Insurance, has been involved in mergers in recent years. Thus, MeritaNordbanken is the
result of a merger between the Merita Bank from Finland and the Nordbanken from Sweden.
MeritaNordbanken has also recently announced a merger with Unidanmark from Denmark
and Christiana Bank from Norway. Meanwhile, Leonia Bank has recently joined forces with
Sampo Insurance.
43
•
In France, a bitter and protracted takeover battle concluded recently with BNP securing
control of Paribas but narrowly failing to also obtain Société Générale, which is one of the
case study companies.
•
In Germany, Deutsche Bank AG, which had already merged with Bankers Trust to create the
largest bank in the world, and Dresdner Bank announced that they were to join forces as this
report was being written, only for the alliance to break down later in acrimony. In this case,
Allianz, which is Germany’s and Europe’s largest insurance company, was also a major party.
•
In the Netherlands, two of our case studies, ABN AMRO and the ING Group, are the results
of an intensive process of mergers, with the third, Bouwfonds, being taken over by the
former while this consolidated report was being prepared.
•
In Spain, the four main banking groups were involved in two major mergers in 1999, one of
these involving the Banco Bilbao Vizcaya and Argentaria and the other leading to the
formation of Banco Santander-Banco Central Hispano, which is one of our case studies.
•
In the UK, all three of our case studies have figured prominently in merger and takeover
activity in recent years. Midland, once an independent bank in its own right, was taken over
by the Hong Kong and Shanghai Banking Corporation (HSBC), in 1992; while NatWest and
Legal & General agreed a friendly merger in 1999, only for the former to become the target
of a take-over battle between the much smaller Bank of Scotland and the Royal Bank of
Scotland, eventually won by the latter.
Most of these examples involve retail banking and the mergers/acquisitions have tended to be
primarily national rather than cross-border in nature. As the European Central Bank has argued, a
key consideration has been fiscal, regulatory and cultural differences in banking between
European countries. The market for housing finance, for instance, is strongly shaped by national
regulations, subsidies and administrative procedures that differ across countries. Consequently,
cross-border mergers in retail banking are impeded by the difficulty of generating standardised
products internationally.
These barriers to cross-border merger activity are less pronounced in other areas of the financial
sector. In investment banking, markets have not been regulated to the same extent as in retail
banking and, consequently, the development of standardised services is more feasible. The big
German banks have been actively expanding their international presence in this area in recent
years. For instance, in 1995 Dresdner Bank bought the UK investment bank Kleinwort Benson,
while in 1998 Deutsche Bank, having some years earlier acquired the British merchant bank
Morgan Grenfell, announced the take-over of Bankers Trust of the USA.
In insurance, too, a growing number of companies are developing an international presence. This
is particularly the case in Europe where a small number of large insurers have established a
genuinely pan-European set of operations. This has been facilitated by the EU Insurance
Directive, passed in 1994, which deregulated domestic markets and facilitated the entry into new
markets of foreign firms. For instance, AXA, the French group, has recently acquired Royale
44
Belge of Belgium, further expanding the group’s European spread, which involves a major
presence in Spain (where it took over Aurora-UAP) and the UK (where the Sun Alliance was
absorbed). Moreover, the German-based Allianz last year secured control of AGF, one of our
French case studies, and has been linked with various British mutual life insurers.
Important though they are, the considerations cited by the European Central Bank for the
differences in the nature and extent of cross-border mergers and acquisitions between retail
banking and other financial services are not the complete explanation. Also important is the
nature and extent of the scope for rationalisation that exists in retail banking in the light of the
competition from new entrants and new forms of delivery discussed earlier. In the case of
Deutsche Bank AG and Dresdner Bank, for example, a merger had been seen as a way of dealing
with what has been described as the two banks’ ‘biggest headache’ – retail banking is barely
profitable in the first case and losing money in the second, threatening the ability to defend, let
alone promote, their respective investment banking businesses (Harnischfeger, Financial Times,
8 March 2000). A merger, and the effective disposal of the two sets of branches to Allianz, which
was likely to use a reduced number to cross-sell insurance products as well as provide traditional
banking services, looked to be a very attractive proposition.
The circumstances surrounding the proposed merger between NatWest and Legal & General in
the UK and the subsequent successful takeover of the former by the Royal Bank of Scotland offer
a second illustration. The proposed merger was premised on the bancassurance concept, in
which banks use their existing structures to cross-sell assurance products, and the need to create
a force that could be a major player in the next phase of development, which is seen as Europeanwide. Put simply, while the stock market accepted the logic of what NatWest and Legal &
General were trying to do, it nonetheless much preferred a bank-to-bank merger that would
produce immediate cost savings, in the form of branch closures, to the benefit of shareholders.
The proposed merger between NatWest and Legal & General offered little more than £100
million in cost savings. The takeovers launched by the Bank of Scotland and then the Royal Bank
of Scotland promised almost ten times that amount, accounting for more than 20,000 jobs.
Economic and Monetary Union looks set to facilitate the emergence of more pan-European
groups, especially as most commentators seem to accept that the phase of domestic consolidation
is in its last throes. Less clear, however, is the main form that this development will take. The
obvious route, via merger and acquisition, is still seen as problematic in retail banking. The fall
in their share price in recent months means that it is harder for the banks to finance offers with
their shares and there are worries about being able to extract the same levels of savings available
to domestic players when job cuts are involved. A second possibility is to ‘inch’ towards
collaboration via the taking of significant stakes in other businesses in the way that one of our
Spanish case studies, Banco Santander-Banco Central Hispano, is doing. BSBCH has stakes in
the Royal Bank of Scotland, which helped to finance the NatWest takeover, Société Générale in
France, Commerzbank in Germany and San Paolo IMI in Italy. The third possibility is to
compete for customers in other countries via the Internet. This is the route that AXA in insurance
and Lloyds-TSB, the most successful of the retail banks in the UK, would appear to favour. In
45
any event, a major objective for a bank is to achieve a size and significance that will make it
possible to be a major player in the next round of restructuring that is expected following the
introduction of the single currency.
In the case of companies in the finance sector, the coming of the euro does not just affect pricing,
cost budgeting and accounting systems. Virtually the entire range of products and services can be
affected. The practical implications of introducing the euro are therefore enormous. Indeed, a
review of the national reports suggests they involve no fewer than eight main areas:
•
organisation structures;
•
product and service changes;
•
systems changes;
•
external communications;
•
internal communications;
•
training;
•
pay and conditions of employment;
•
consultation and negotiation.
Typically, it emerges from the case study companies, a senior member of the Board has been put
in charge of preparations for the introduction of the euro as a circulating currency. A range of
task forces, involving several hundred staff, has also been involved, with a substantial amount of
the organisation’s information technology resources being devoted to the project. In some of the
smaller companies, such as Bouwfonds, consultants had been engaged to do much of the work.
In most cases, the euro has considerable implications for the products and services. Some
activities have been made redundant, the most obvious being foreign currency transactions. At
the same time, however, most companies have also seen the euro as an opportunity to develop
and market new products and services. In the words of the Bank of England reviewing the
responses from a number of organisations including not just HSBC (Midland) and Natwest but
also ABN AMRO and Deutsche Morgan Grenfell, ‘Most institutions see preparing for EMU not
just as a technical systems matter but as a strategic opportunity, and are planning accordingly’.
Preparing for EMU has nonetheless involved some extremely complicated technical systems
changes. At the heart of these have been both the hardware and the software of information
technology. Especially critical has been the need to introduce arrangements to handle euro
payments. Existing RTGSS (Real Time Gross Settlement Systems), which are designed to reduce
interbank settlement risks between members, have not only had to be enhanced to accommodate
the euro, they have also had to be interfaced with the so-called Target system designed by the
46
forerunner of the ECB to allow banks to receive and give intra-day value for payments from one
country to another.
Communications, both with customers and employees, have also been given a very high priority.
For example, Table 11 and Table 12 give details of the nature and extent of communications that
the Société Générale in France undertook with both groups. It will be seen that this involved a
range of different media including newsletters, seminars and videos targeted at specific groups.
Table 11
1.
Société Générale: main forms of internal communication on EMU
Internal newspapers and documents
Retail banking
Periodicals: The position on … special euro; Questions/Answers special euro
The network of The appointments with the Euro (supplement DIST to the appointments) with
the euro
Wholesale banking
Publications: The Euro J-XXX, The Euro SBAN/TIT, Euroscope DECC
General
Periodicals: The appointments with the Euro, Convergences, loose-leaf file,
Questions/ Answers
Regular column on the euro in the internal company newspapers (Sogechos, The News on
Training, DISC, International Newsletter, etc.)
2.
Support materials
Training kits RSRH (general), Retail banking (aimed at different segments of customers),
Wholesale banking and implementation
8 training modules – general and specialised skills
3.
Computerised and audiovisual support material
Database of pooled knowledge, specifically for those involved
VAO on the intranet ‘Test your knowledge about the Euro’
Videotape : ‘The Euro and Societe Generale’ (available in English and French)
4.
Awareness raising
Retail banking
Regular meetings
Various seminars and presentations
Wholesale banking
Seminars and presentations to the subsidiaries (SGTB Monaco, SGBT Zurich, Delahaye),
establishments and various services
Training of the salesforce and computer specialists of the company
Various international seminars (bank meetings in Macao, investment banking, getting to
know SG, international securities lending and repo, office and computer specialists
Various seminars and presentations
Internal management
Training of management personnel
Preparation of the training sessions “Conduct of change”
47
General
Plan for internal communications
Graphic chart “Euro”
Help for actions taken by the subsidiaries
Table 12
1.
Société Générale: main forms of external communication on EMU
Publications and documents
Retail banking
Brochures: Your company and the Euro; You and the Euro; Your patrimony and the Euro;
Your profession and the Euro
‘Best of’ the question and answers sessions from the forums
Various columns and pamphlets (catalogues, customers statements)
Wholesale banking
Brochures: The Euro: convenient with Société Générale, in several languages – periodical and
international publications
2.
Support materials
Retail banking
Training kits: youth kits, enterprise meetings kits, good range of meeting kits
Computerised and audiovisual support material
Retail banking
Software package ‘Euro Action Plan’ for businesses
General
Start-up of the euro pages on the Internet web site of Société Générale (general, small and
medium-sized businesses, private parties )
3.
Events
Retail banking
16 forums on small and medium-sized enterprises on a countrywide scale (10,000 small and
medium-sized enterprises mobilised since May 1997)
16 forums on ‘Euro-patrimony’ (15,150 households holding sizeable inheritances involved)
187 Days of the Euro (9600 small and medium-sized enterprises involved between 09/02/98
and 03/07/98)
1 forum for investment and savings (over 3 days, 1,100 persons took part in the S.G.
‘Barometer’)
108 days on ‘The stock exchange and the Euro’ (12,000 inheritance-holding households,
among which were 4,000 future ones)
Operation TGV/Airports (12,000 questionnaires handed out to enrich the database on
prospects)
Various presentations to self-employed professionals (CPAs, lawyers), Universities and
‘Grandes Ecoles’ and enterprises (Euro-partenariat show). Local contacts (breakfasts,
individual meetings) covering 5,000 small and medium-sized enterprises
Wholesale banking conferences arranged with about 20 establishments in foreign countries
(New York, Tokyo, etc.), over 1,500 clients
Follow-up on individual contacts (‘one-on-one’) initiated in 1996 with large enterprises (over
500 clients contacted by the end of 1997)
48
There has also been considerable activity in the area of training and several of our respondents
described in some detail the steps they had taken. Our example is again taken from Société
Générale in France to show how the training was meshed with communications.
Société Générale: training plan for EMU
A general training plan was implemented for all 20,000 employees of the network of retail
banking of the Société Générale, in order to enable them to answer the questions likely to be
asked by customers as well as to sell and handle all available services in euro as from January
1999. The training plan itself was divided into three phases. The first one (July to November
1998) was simply pre-training, the second one (September to December 1998) related to the actual
training undertaken by groups and the third one (1999) was the follow-up phase of the training.
Phase 1 consisted of providing to all the employees 24 themes giving a certain amount of data on
the euro (explanation of the general rules pertaining to the euro, the impact of the euro on the
services offered by the bank, mode of operation, practical exercises, etc.) in order to ensure the
level of knowledge necessary to follow phase 2 of the training.
Phase 2 put in place 2,000 training sessions for all the employees concerned. Each session had a
maximum of 15 persons and lasted from I to 1.5 days depending on the business area. These
sessions were held by 90 trainers from various cultures and origins who had been trained into the
single monetary unit during the summer of 1998. To lead the sessions, the trainers used data on a
CD Rom shown through a microcomputer and a specific video projector. This CD Rom contained
about 350 visual aids illustrating the wider issues of the Euro and included a commentary, and
some relevant exercises.
Phase 3 contained three elements: a post-training quiz, the implementation of a specific ‘help-line’
and access to a database. In December 1988 a quiz made up of 26 questions was sent to the entire
retail banking network. As well, a database, operational from December 1998, allowed every
employee to access from his working place data reviewing the whole euro issue. That database
was constructed from the commentary contained in the training CD Rom. Finally, the help phoneline was established as from January 1999. It aimed to help employees either by answering their
questions directly or by directing them towards the relevant person. This service was closed in
February 1999 because of the very low number of calls.
In total, after the prerequisite and the additional training sessions provided, together with the
implementation of ‘euro days’ and Property Forums, about 400,000 hours of training were given,
allowing the entire workforce, whether in contact with the customer or not, to be fully informed
about the euro as from 4 January 1999 .
EMU has also had a direct impact on the pay and conditions of employees in the finance sector.
Discussion of this is left to a later section after the implications of EMU more generally have
been considered. An important issue, however, is the nature and extent of the involvement of
works councils and trade unions in the actual implementation of the euro. In most cases, these
had been informed about, and consulted on, the steps that had significant personnel implications.
In some cases, notably AXA, it seemed that the general issues surrounding the implementation
of the euro had been the subject of discussion at the EWC.
49
No major disputes were reported over the introduction of the euro. However, a specific problem
had arisen in one of the UK banks involving the payment centre of corporate banking services.
Initially, argued the responsible trade union officer, the local managers had tried to secure a
change in the contract of the individuals who would be involved in operating the Target system
without consulting the union. Subsequently, the management and union had negotiated an
agreement covering working on bank holidays necessitated by the introduction of Target,
providing for enhanced hourly rates and time off in lieu. There had been a dispute over the
application of the agreement reflecting the fact that Christmas Day 1999 and New Year’s Day
2000 would fall on a Saturday.
The issue of the rounding up of pay on conversion also emerged in several interviews, with some
of the managers emphasising that the costs would be considerable. Of those commenting on the
issue, there was a range of views. In the case of the ING Group in the Netherlands, management
said they saw see the conversion as a technical affair, not an item for discussion or negotiation
with either the central works council or the trade unions. In other cases, for example
Commerzbank, it was anticipated that the issue was likely to give rise to problems that would
have to be dealt with in negotiation. Any number of figures would have to be changed in works
agreements. In a further case, management said that it was considering the possibility of trying to
use an element in the pay increase that year to fund any rounding up that might be involved.
Sectoral level
The process of merger and takeover that EMU is encouraging would appear to have very
significant implications for the sector bargaining that has been the predominant pattern other
than in the UK (see Table 13). In particular, it is calling into question the balance between
sectoral bargaining and company bargaining, if not the future of sectoral bargaining altogether, in
most countries. The most general case is that of the Netherlands, where the wave of mergers in
the 1980s and the 1990s has resulted in the formation of three large banks, precipitating a long
discussion about the advantages and disadvantages of company-level agreements versus sectoral
agreements. To paraphrase the Dutch report, over the past 10 years the sectoral agreement has
evolved from a standard agreement to a framework agreement. There has been a gradual
decentralisation of collective bargaining, the large banks in particular making use of the
possibilities for ‘customisation’ in areas such as working hours, pensions and job rating.
Recently, the discussion came to a head. The question debated was whether the current sector
agreement for banking would continue to exist. Three options were considered:
1. the integration of the industry agreements for banking and for insurance into one sectoral
agreement for financial services;
2. the (further) development of the banking sector agreement from a standard into a framework
agreement;
3. the adoption by the large banks of company-level agreements.
50
The outcome was a decision at the end of 1999 by the three large banks, along with two others,
to opt for company agreements. As a result, the coverage of the sectoral agreement will drop
from approximately 100,000 to approximately 20,000. In the words of the Dutch report, this
means a ‘fundamental change in the bargaining structure in f inancial services in the
Netherlands’.
The balance between sectoral and company agreements is also a very live issue in Finland and
Spain, and for very similar reasons. The process of merger and amalgamation is pushing
companies towards organisation-based systems. In Finland, where the sectoral agreement in
banking is uniformly binding for the whole industry, some of the issues for negotiation have been
shifted from the sectoral to the company level by an agreement between the employers and trade
unions. This reflects the domination of the market by three big banking groups
(MeritaNordbanken, Leonia Bank and the co-operative banks).
In Spain, similar processes have been taking place, with merger and takeover being an important
catalyst. Perhaps the best example is that of AXA in insurance. Here the recent company
agreement was the vehicle for the complex negotiation process that took place after the merger
with the insurance companies AURORA and UAP, making it possible to facilitate the integration
of the staff of the three companies into the new Group AXA Insurance.
In Germany, developments have taken a slightly different course, but the underlying issues are
very similar. As already explained, each of our three cases studies, Deutsche Bank,
Commerzbank and Dresdner Bank, which have come to dominate private sector banking, have
recently established separate so-called ‘direct’ banks with their associated call centres, which do
not belong to the employers’ organisation. In each case, a major reason for establishing these
‘direct’ banks as independent organisations was so that they could ‘escape’ the coverage of the
national sector agreement, issues such as greater flexibility and the option of Saturday work
being especially important.
In the case of Deutsche Bank, after pressure from the works councils and from the trade union,
the management subsequently agreed that the direct bank should become a member of the
employers’ organisation and thereby come under the coverage of the sectoral agreement. Their
agreement to do so was, nonetheless, based on the precondition of local negotiations on greater
variability in the collectively agreed pay grades and on opening hours on Saturdays.
The future remains unclear. As one of the personnel managers interviewed emphasised, this
process might lead to company collective agreements. Indeed, his view was that sector collective
bargaining in Germany was more at risk due to the growing competition and consolidation than
as a result of the current inability of the employers’ organisation and trade union to reach
agreement on a range of contentious issues.
51
52
Table 13
Collective bargaining arrangements and EWCs in the finance case study companies
Company
Company
Company
Finland
EWC
MeritaNordbanken
Banking sector and company
agreement
Nordic Works Council
Leonia Bank
Banking sector agreement
No EWC
Pohjola Insurance
Insurance sector agreement
No EWC
France
EWC
Credit Lyonnais
Banking sector agreement plus
company agreements on specific items
EWC (1999)
Société Générale
No EWC
Assurances Générale
No EWC
Germany
EWC
Deutsche Bank
Private sector banking agreement
Works councils
EWC (1997)
Commerzbank
Works councils
National works council = EWC
Dresdner Bank
Works councils
No EWC
Netherlands
EWC
ABN-AMRO
Banking & insurance sector
agreements; company agreement
under review
EWC (1997)
ING Group
Banking & insurance sector
agreements; company agreement
under review
EWC (1998)
Bouwfonds
Company agreement
Spain
EWC
Banco Santander Central-Hispano
company agreement on specific items
EWC (1999)
Banco Popular
company agreement on specific items
No EWC
AXA
Sector agreement plus company
agreement
EWC (1996)
UK
EWC
HSBC (Midland)
Company agreement
EWC (1996)
Legal & General
Company agreement
EWC (in negotiation)
NatWest
Company agreement
EWC (1996)
No EWC
Country
Taking into account the situation in the different countries, this discussion does not necessarily
mean that sectoral agreements will disappear, but that their function may change. Significantly,
the AXA Group has had an important role in the development of the new 1999 sectoral
agreement for the Spanish insurance industry, which might (in the opinion of the AXA
representative) be incorporated into the banking sector collective agreement as the big banking
groups are buying insurance companies. Compared to the agreement for the banking sector,
however, the insurance agreement is much more of a ‘framework’ than a ‘standard’ agreement
and does not guarantee as many minimum terms and conditions – for example, it does not
include any reference to working time. The agreement, in other words, assumes a two-tier system
of sectoral and company agreements.
A further consideration, which was raised by the author of the Dutch report, is that, despite
greater integration, domestic competition, and not country competition, will continue to be an
important consideration helping to underpin the rationale for comprehensive sectoral
agreements. Moreover, further EU integration could lead to greater consensus between the social
partners at the national (sector) level as they find they both have a stake in promoting the
national interest in Brussels.
Turning to the influences on sector negotiations, it seems that collective bargaining in the
banking sector still has a strong national orientation. There is no evidence so far that sector
negotiations in the five countries where they are practised are taking account of collective
bargaining outcomes or economic developments in neighbouring countries. In the words of our
Dutch respondent,
‘The effects of EMU on collective bargaining are very limited. The preparations for bargaining
focus completely on the Netherlands. Comparisons of data on wages, labour productivity and
costs per product unit do not play any role in the preparations for bargaining of either the
employers’ organisations or the trade unions. During the actual bargaining they may be alluded to
if, for example, the employers introduce examples of lower wage costs in other countries. The
trade unions then counter these examples with productivity data. The use of comparative data thus
has a ritual character. The eventual results are also not influenced by collective agreements in the
banking sector in other EU countries.’
It is clear, however, that informal discussions and the exchange of data and methods of approach
do take place from one country to another. In the case of the employers, several reports
mentioned informal discussion by the chairs of the associations of the European employers of the
banking business involving exchanges of information on economic development, collective
bargaining development, pay increases or specific projects. Not surprisingly, the value attached
to such discussions depended on the country. The Dutch employers did not see any need for more
intensive cooperation and did not believe there was much to be learned from other countries’
experience, as their perception was that the Netherlands is in the lead when it comes to labour
flexibility in collective agreements.
In the case of the trade unions, the main focus of activity is UNI-Europa Finance (formerly
EURO-FIET), which is the European regional organisation of the newly merged international
53
trade union for finance, commerce and telecommunications. All the associated unions meet once
a year to exchange information and to determine joint activities. In recent years activities have
increased, in part because of the establishment of European Works Councils in the large banks.
As Chapter 2 has already indicated, in March 1998 EURO-FIET adopted a strategy paper on
Economic and Monetary Union: the impact on employment and collective bargaining, which
emphasises the need for European-level coordination of national sector and enterprise
bargaining. A year later, in June 1999, this was followed up by the adoption of an Action Plan for
a new euro bargaining network, a key feature of which is the benchmarking of terms and
conditions.
Regional cooperation is developing in the EU region of the Benelux countries and France. It is
not a separate level with a formal status: the negotiators from the countries in this region visit
each other periodically for one or two days. They focus primarily on the exchange of information
and the working out of plans for groups with offices in their countries. By exchanging
information on wages, working times and working conditions, etc., they get to know each other
better.
As for the prospects for EU sector bargaining, the Dutch employers’ organisation representative
expressed the strongest views. The employers, he emphasised, have no need of a specific sector
policy and they think that UNICE can represent the general interests of employers at EU level.
His members do not want either a European sector agreement or the inclusion of European
chapters in national agreements. They expect that, eventually, there will be some convergence of
terms of employment for the financial sectors because bargaining in the industrial sectors of the
EU countries will become linked and have a knock-on effect on national terms of employment
for the services sector. The European Central Bank (ECB) may have a direct effect. For example,
it already affects business hours in the bank sector.
The German employers’ representative pointed to the complexities of the structures in the
banking business at European level as a major complication factor. There is no joint European
employers’ federation for the banking business due to the different groupings (that is private,
public and co-operative banks). While the German federation only covers the private banking
business, employers’ federations in other countries represent private and public banks. In some
countries, employers in banking are a member of the employers’ federation (as in Germany) but
not in others. All these institutional factors pose obstacles to achieving a common position and
policy at European level.
According to the Dutch trade union representatives, the EU sector level will become more
important. It is a question of time, but inevitable. For this purpose the unions will have to set out
a new course: if the trade unions want to reach mutual agreement at EU level, some national
internal policy freedom must be relinquished beforehand. He nonetheless recognised there would
be difficulties. There are major obstacles in the form of the big differences between countries
and regions as regards tax systems, social security, inflation and productivity. Their objective was
not a European sector agreement as such, therefore, but recommendations drawn up within the
54
framework of the EURO-FIET guidelines, which could subsequently be put on the agenda of
national (banking) bargaining and form a European chapter in the national agreement.
The recent EURO-FIET proposals for the coordination of collective bargaining across the EU
also figured in the interview with the European officer of UNIFI. She said there was a lot of
support for the organisation itself – she described it as ‘a good ‘honest broker’. It was far too
early to predict the outcome, however. It was relatively easy, she explained, for people to sign up
to written policies re coordination. The practice was likely to be more difficult. She was also not
sure that EURO-FIET had the necessary staff and resources. She stressed that it was important
not to try to go too far too quickly; the need was to find specific issues that were close to
members’ interests. Here the benchmarking of terms and conditions that EURO-FIET proposes
to undertake could be the catalyst.
Company level
The nature of company bargaining in banking is different from that in the automotive sector. In
banking, company bargaining is relatively recent in origin and there is nothing like the tradition
of workplace activity or union organisation there tends to be in the automotive sector. The UNIFI
national officer responsible for negotiations at NatWest in the UK made this point in a passing
reference to the fact that the union had not been able to reach agreement with management over
the size of increase in the pay bill in recent years. Although on each occasion they had exhausted
the procedures, with a failure to agree, the members had not been ‘in a mood to do anything
about it’, the closest being a strike ballot on the last occasion. In the finance sector, he added, it
was not easy to get members to appreciate that they were the union and that they had to become
actively involved in its organisation and promoting its agenda.
As has already been indicated, there are good reasons to expect the extent of company bargaining
to grow in particular in the large organisations that are beginning to emerge, which raises
questions about the prospect of cross-national integration. As yet, however, there is little
comparison of pay and conditions between one country and another, except in the case of senior
managers or specialists where there has been a global labour market for some time. To
paraphrase one of the management respondents at Legal & General, the company did not
compare pay levels across the different business areas except in so far as the most senior staff
were concerned, where the emphasis was more on succession planning than on salary setting.
While the group human resources department liked to ‘have some knowledge of what’s going on
in other operations’ the local human resource managers were seen to be the ‘experts’ and would
view headquarters involvement as ‘interference’. Furthermore, the company expressed the view
that there was hardly any scope for comparison across Europe given arms-length operating
activities and the importance of local markets. Generally there was little movement of staff
between operations, ‘they’re so different there’s no need’, and there were no job moves across
European operations.
55
A slightly different perspective came from the management at ABN AMRO. The focal point for
industrial relations is (and will remain) the country organisations. The international human
resource function does have discussions on the coordination of bargaining proposals with the
human resource managers from the country organisations. However, the proposals and the actual
bargaining are country-level responsibilities. The bank foresees a development towards more
labour mobility in Europe. To accommodate this, the bank is considering offering such mobile
staff an employment package in euros. Other employees will continue to be covered by the
relevant national terms of employment.
Benchmarking – the comparison of data on, among other things, wages and industrial
productivity – is not systematically used by the management, either internally, or in the
negotiations with employees or the trade unions. If the human resources function or a project
group need data, the data is collected, but in an ad hoc way.
At the ING Group in the Netherlands, the human resources staff at the international level
recently started to discuss a number of subjects:
•
the introduction of an international options plan;
•
establishing a distinction between expatriates in countries outside and inside the EU (there
are no longer any special allowances for latter);
•
the addition of an international dimension to management development in the Netherlands;
•
the setting up of an international business school.
At these discussions Dutch human resources staff members meet their counterparts from other
countries, such as the UK and Belgium, but there are no structured contacts. It was certainly not
intended to be the forerunner of a European human resources policy. The company did not
believe in central rules and regulations. It had chosen instead to determine a framework for social
policy in the form of norms and values. This was a global approach and applied to all countries,
not just the member states of the EU.
International comparisons of data on, for example, productivity or wage levels were sometimes
drawn up in one country (the Netherlands and Belgium, for example), but they were only used in
that country. Furthermore, the human resources function is setting up a different information
system in the Netherlands. Experience shows that benchmarking reports are not read properly.
They therefore intend to supply more individual and group-oriented information: each manager
or group of managers will receive specific information. In this new approach the making of
international or European comparisons is not a point of any particular interest.
At AXA in Spain, according to the employee and employer representatives, the contents of
collective agreements in the company are not being influenced by the terms of agreements
elsewhere in the company’s operations in different EU countries. Nevertheless, managers and
union delegates make use of performance comparisons, not only in the area of labour relations
56
but also in different areas inside each of the units or companies that belong to the group. With
this purpose, each unit sends quarterly a set of reports about staff, labour costs, productivity, and
performance. They also include a report about the attainment of objectives. With all these
reports, several interviews are carried out to discuss the most significant issues in order to build
synergies among different companies and to create global values that will allow comparisons.
Apparently, too, there is a meeting of human resource managers each year at which experiences
and information are exchanged. At the same time, proposals are made to develop projects in each
business unit. All proposals are studied and tested, often leading to the elaboration of a global
plan to be applied in all countries.
As Chapters 2 and 3 have already pointed out, an important element of the social dimension
accompanying economic integration has been the passage of the EU directive providing for
European Works Councils in multinational companies. Most of the case study companies, as can
be seen from Table 13, either had an EWC or were in the process of setting up one. The
exceptions are the Finnish companies, which is explained by their relatively moderate size and
their concentration on the domestic market. To be noted, however, is that MeritaNordbanken has
a Finnish-Swedish joint works council with similar powers to a EWC. Also, under Finnish
legislation, employees have rights to representation on the companies’ supervisory boards.
Like the automotive sector, most respondents emphasised that they saw EWCs as bodies for
information and consultation rather than negotiation. This view, it must be emphasised, was
expressed by employee representatives as well as managers. The UNIFI representatives in the
UK were especially emphatic on this point. In the words of one of their HSBC representatives,
‘We are going to defend our right to domestic bargaining at whatever cost.’ Employee
representatives in both Germany and France also expressed worries that any bargaining might
lead to a levelling down of conditions in their countries, the fear being that they would have to
stand still while others caught up.
In expressing their views about EWCs, the respondents tended to emphasise the problems they
were experiencing or envisaging rather than the benefits, perhaps reflecting the fact that these
were very early days for EWCs in most cases. In both Germany and the Netherlands, for
example, worries were expressed about potential conflicts of jurisdiction between EWCs and
national works councils, which helps to explain why at Commerzbank the responsibilities of the
EWC had been vested in the central works council. At Deutsche Bank, it was felt it was
unhelpful that employee representatives were being mandated. At ABN AMRO in the
Netherlands, the lack of effective representatives from some countries like the UK was seen as a
problem. At MeritaNordbanken in Finland, differences in the subject matter of collective
agreements and legal frameworks between Finland and Sweden were cited as problems; for
example, in the area of co-determination, it was suggested there had been ‘some disagreement’
between employee representatives from the two countries as to the ways of exercising influence.
57
At HSBC in the UK, management complained that EWC had not proved as useful a forum for
the exchange of information as they had hoped due to the lack of business understanding of the
employee representatives. Management was not getting much out of it – it was seen as a ‘talking
shop and a bit of a waste of time’. Part of the problem was the lack of pan-European issues,
which stemmed from the nature of the business.
‘The way we run the business in other countries is very different. They’re investment banking
people, brought in through merger or acquisition, relatively small numbers scattered all over
Europe. There’s no commercial network in Europe, no similarity between the UK and Europe. In
each country the country head runs the business – its not pan-European. There are different
products, different services and a high degree of autonomy. Pan-European bargaining is a nonstarter. There are no business pressures for this, no common terms and conditions across Europe,
we operate a policy of market-rate in the location concerned.’
Interestingly, in a separate interview, one of the employee representatives at the HSBC (Midland)
Bank also identified insufficient similarity across European operations as one of the sources of
frustration:
‘In Europe staff are mainly engaged in commercial and corporate banking, private banking,
treasury and asset management. The Greek delegate works in shipping finance, which has little in
common with domestic banking. In Germany it’s commercial banking, private banking and
treasury. In France they deal with corporate and private banking, investment banking and asset
management – it’s a very small operation. So there are huge structural problems in comparing
terms and conditions across Europe.’
Also clear, however, is that EWCs have considerable potential to become a key element in the
process of Europeanisation. At ABN AMRO in the Netherlands, it was expected that the
European Staff Council (ESC) would become more important in the coming years, even if it was
not the forum for negotiating the terms and conditions of employment. Examples of Europeanlevel topics being considered by the ESC were the bank’s European organisation structure, the
consequences of reorganisation in two or more countries, training and employment. In the first
year, the ESC was mainly occupied with the organisation of its own discussions and learning to
work as a team. It has now decided to play an active role in two matters that are relevant to all the
country organisations: the pressure of work and employability. It is trying to put these two issues
on the country-level agendas for negotiations.
At the ING Group also in the Netherlands, the EWC had recently launched a number of new
initiatives. With regard to the composition and competence of the council, it was decided to
extend membership to representatives of Poland, the Czech Republic and Hungary. In fact, they
also wanted to allow representatives of non-EU countries to join as observers, which implied an
upgrading of the EWC to a global works council. For the management of the ING Group this was
a bridge too far and they did not agree with the proposal. In addition, the EWC decided that a
form of employees’ representation should be established in every country without necessarily
exporting the Dutch model for works councils. The international management is to bring this to
the attention of the local and national management. Agreements were also made about providing
information and the role of the EWC in take-overs.
58
The EWC has also initiated a number of activities for the harmonisation of social policy in the
EU countries. After examining both the banking and the insurance sector agreements applying
within the company, the Dutch representation presented 32 harmonisation points and asked the
EWC to formulate priorities. The following priorities were established in the form of guidelines
to be applied globally throughout the business:
•
every employee must be offered an employment contract when he or she joins the company;
•
every employee is entitled to training;
•
there should be equal treatment of men and women;
•
every employee should be entitled to a continuous (unbroken) vacation;
•
there should be opportunities for child care.
Furthermore, every country must reserve a percentage of the gross wage for each of the abovementioned priorities. The ING Group management agreed to the proposals, but was concerned
about the proposal for percentage of the gross wage. In their view, this is a matter for bargaining
in the appropriate country or organisation unit. The Central Works Council in the Netherlands
and its counterpart in Belgium have also undertaken initiatives to facilitate the interchange of
staff between the Netherlands and Belgium. In this way employees in the border areas can find a
job more easily in another ING Group branch.
There are two considerations that may be important in helping to account for these differences.
One is the balance between the number employed in the country of origin and other European
countries. Interesting here is that companies such as Deutsche Bank, Commerzbank and
Dresdner Bank in Germany, Credit Lyonnais and Société Générale in France and HSBC,
NatWest and Legal & General in the UK have far fewer employees in other European countries
than ABN AMRO and the ING Group from the Netherlands. Indeed, HSBC and NatWest have
cut back on their operations in continental Europe in recent years, with the former in particular
concerned with global rather than European developments. In the circumstances, it is perhaps not
surprising that there is more European-level activity in ABN AMRO and the ING Group than in
the other companies.
A second and very much related issue relates to organisation structure. Both ABN AMRO and
the ING Group had set up European divisions in 1999. The underlying reason is that this
integrated company structure was seen as the best way to meet the demands of the coming single
European financial market. The establishment of a single European capital market will enable an
increasing number of companies to manage their own financing via bonds on the capital market,
meaning that they were likely to concentrate their bank affairs with the big financial players who
can support them on a European scale. In addition, it was anticipated that there would be a
growing market for employee benefits. Perhaps inevitably, though, whatever the initial reason,
once a European division is created it begins to take on a life of its own, which also embraces
human resource policies and approaches
59
Conclusion
As with the automotive sector, there appears to be a strong trend in favour of the development of
company bargaining over working practices in the finance sector. The process is also being
driven by management and reflects a number of common features. Especially important is the
growth in the size and complexity of the companies as a result of merger and takeover that EMU
is encouraging. Existing sector arrangements cannot deal in the kind of detail that is increasingly
required and very often do not allow the larger companies the flexibility to innovate that they are
seeking. This seems to be true in particular where these existing arrangements are rooted in
separate agreements for banking and insurance – many of the companies are developing across
as well as within the traditional boundaries of the different sub-sectors of financial services.
This does mean the end of sectoral agreements, however. Indeed, in Spain a sectoral agreement
for insurance has been notably influenced by company agreements in some of the larger
companies such as AXA. In three of the countries, Finland, the Netherlands and Spain, recent
years have also witnessed major agreements at the national level undergoing a double process of
centralisation and decentralisation. The changes registered in the last years in the Spanish system
of collective bargaining have been partly influenced by the processes of European economic
integration and EMU.
It does suggest one of two routes. In the first, the sectoral agreement becomes a framework
agreement rather than a standard agreement. In the second, a two-tier arrangement develops: the
sectoral agreement deals primarily with the situation of the SMEs, while the larger companies
introduce their own agreements that may or may not build on the sectoral agreements.
As in the automotive sector, there is a widespread consensus that collective bargaining at either
the EU sector or Euro-company level is a distant prospect. At sector level, the situation in
finance is not dissimilar from that in automotive. Employers’ organisations are opposed and
would appear to have particular problems with the fragmented patterns of representation –
private banking and savings banking; and banking and insurance. Trade unions, in the form of
UNI-Europa Finance, are developing processes of coordination that could begin to have an effect
on national negotiations, especially in the benchmarking proposals to produce information on
key issues that national negotiators can use.
At the Euro-company level, the situation in finance is very different from that in automotive. In
finance, management’s use of the ‘coercive comparisons’ that is the driving force behind the
increasing harmonisation of working practices in the automotive sector is largely absent. Put
simply, there is nothing like the level of homogenisation of products of the automotive
manufacturers or the integrated production arrangements that accompany them. For their part,
employee representatives lack the history and tradition of workplace organisation that is
embedded in the automotive sector. In a number of the companies, EWCs represent the very first
opportunity that employee representatives have had to meet and discuss issues with one another.
60
There was a widespread consensus, particularly among management respondents, that, although
the euro will make pay and other terms of employment more transparent, its coming is unlikely
to have any special effect on wage levels, wage increases or the formula for calculating the
margin for wage increases of the great majority of employees. For the terms of employment, the
local (country) labour market will continue to be the determining factor. There also remain, in
the perception of the interviewed, many differences – not only in purchasing power, tax systems
and social security systems, but also in industrial relations and culture. Typically, divisions of the
organisation representing the brand names have a substantial degree of autonomy in the terms of
employment. Harmonisation of the different country-level terms and conditions, some argued,
will only become relevant if and when the diverse tax and social security systems are
harmonised.
There were specialist groups of managers and technical staff who were exceptions to this
generalisation. These were rarely in unions or the subject of collective bargaining, however.
Moreover, an international labour market for such groups was already in existence, based on
such international centres as London, Frankfurt and New York. It was this international market,
rather than EMU, that was the main consideration.
One area in which several of our respondents expected further changes was in the ratio between
the fixed and variable components wages. In the words of the Dutch report, ‘The Anglo-Saxon
influence – with more emphasis on the variable components – is clearly evident, even in the
Netherlands, where there is a stronger emphasis on job security and social provision’. Key
considerations in what was seen as a change in management structure (and culture) were the
internationalisation of top positions, which are increasingly being filled by foreign appointments,
a bigger role for shareholders and greater emphasis on short-term results. If top managers make a
mistake, they have to step down.
As for the impact on employment, the most detailed analysis reported is that of UNIFI (1999),
which is the UK banking union. Drawing on data from the Bank of England, it suggests that the
key direct effects of the euro are likely to include the following:
•
the costs of introducing the euro will make a considerable dent in profit margins, the
implication being that management will have to make savings in other directions in order to
keep these margins at acceptable levels. Overall, the European Banking Association
estimates 8-10 billion euros. Individual banks have done their own calculations;
•
more transparent pricing, a reduction in transaction charges and more cross-border services
provision will also exert downward pressure on profit margins – and more risky and earnings
more volatile;
61
•
retail customers may remain loyal to their local banks, but increased competition is expected
to lead to the erosion of traditional banking relationships between corporate customers and
their ‘house’ banks – Shell, for example, has 15 banks at the moment and has stated its
intention to reduce this to just one;
•
even though some national legal, tax and regulatory differences will remain, it is expected
that banks will restructure what has been termed ‘hub and spokes structures’ (for example
centralisation of processing functions, accounts services and treasury management) to better
place themselves to move into and sell widely throughout the euro zone with only a marginal
presence in any one country –the key vehicle being multilingual call centres that can sell
Europe-wide;
•
UNIFI also expects further and considerable consolidation of the sector as national banks
lose their natural home base advantage and seek to merge or acquire to expand their
distribution into other (more likely to be neighbour) countries – Germany where the top five
banks have only 17 per cent of market share is singled out for having most ‘scope’.
All of these changes, argues UNIFI, will have a direct impact on the levels of employment in the
sector, the nature of work and jobs. Thus, the introduction of the euro means a direct elimination
of certain functions – jobs in (intra-EU) foreign exchange and some treasury functions will be
the immediate targets. Retraining and redeployment are also expected in the central banks. An
example readily given when job losses are discussed is that of the ECB itself where it is often
quoted that while in 1995 EU central banks employed 64,753, the US Federal Reserve (covering
a similarly sized area) employed 23,727. Overall, the estimates of job losses in UIFI’s report
range from 200,000 to 500,000.
Over the longer term, increased competition and deregulation are also expected to further
lengthen the business day and week. The introduction of Target, which is the payment system
designed by the ECB forerunner to link the existing national systems to the ECB euro payments
system, has already had this effect: it requires opening hours from 7.00 a.m. to 18.00 p.m. every
weekday bar two (25 December and 1 January). So too will every national payments and
settlements system – for euro business – having a particular effect on bank holidays, which occur
on around fifty days a year across Europe.
Some of these points also feature in other reports. According to estimates of the Spanish Private
Banking Association and the Savings Banks Spanish Association, for example, the cost of the
introduction of the euro for the Spanish financial institutions will amount to a minimum of
170,000 million pesetas. Other estimates from the economic studies departments of major banks
BSCH and BBVA raise that figure to a maximum of 225,000 to 250,000 million pesetas,
amounting to around 2 per cent of total annual operation costs distributed over a period of four
years. Moreover, the finance sector will lose 94,000 million pesetas (10 per cent of annual
profits) as a result of the disappearance of the currency-exchange business. The average cost of
the adaptation to the euro for insurance companies in Spain has been 115 million pesetas (0.2 per
cent of total premiums).
62
Similarly, the interviews in Finland revealed that a certain element of foreign exchange and
interest trading income vanished after the disappearance of several major European currencies.
In the case of MeritaNordbanken, for example, the effect is a 40 per cent reduction in the volume
of foreign exchange and interest rate dealing. In monetary terms, this loss for MeritaNordbanken
is in the range of 50 million Finnish markkas (8 million euros) annually, of which only a limited
amount is recoverable due to the introduction of various instruments using currencies from
outside the euro area.
The increasing competition foreseen as a result of the introduction of EMU may well lead to
changes in labour practices, such as the creation of professional platforms and the reduction of
weekly working hours to 35. They also indicate that weekly working hours will become more
flexible: each worker must work a fixed number of hours and then, depending on the capacity of
the worker, a flexible number of hours.
The near impossibility of distinguishing the impact of EMU from the wider trends in the sector
was stressed in a number of the interviews. This is especially true in the case of the quality of
employment. The need for a wide range of skills was emphasised both in connection with EMU
and with changes in the sector more generally. Moreover, there was likely to be a very varying
impact depending on the particular operations involved.
In the case of so-called ‘back office’ activities, much of the operational work can now be placed
anywhere in the world. For example, ABN AMRO recently set up a software development group
in Pakistan. Meanwhile, the latest development in HSBC’s focus on Asia and the continuing
trend to remove ‘back office’ work from the branches has been the announcement of ‘Project
Monsoon’. Under this pilot project, ‘back office’ work is due to be transferred to an HSBC
processing centre in China.
Assessing the six countries, two things seem clear. The first is that EMU is helping to bring
about a considerable restructuring, which has significant implications for the nature and extent of
employment throughout the sector. The second is that, while these pressures stem from
European, and in some cases global developments, the restructuring takes effect in specific
contexts and therefore has to be handled within existing national and company frameworks.
63
Chapter 5
The road haulage sector: challenges and
opportunities
Accurate figures for employment in the road haulage sector are especially difficult to come by
because of the complexity of their collection in most countries – for example, road haulage is
often combined with other transport sectors and many employees in road haulage are regarded as
belonging to other industries for statistical purposes. Based on the figures in the national reports,
the best estimates for each of the countries would be as follows: Finland, 20,000; the
Netherlands, 120,000; Spain, 330,000; Germany, 400,000; and France and the UK each around
500,000 employees. It seems, therefore, that road haulage employs less people than finance in
each of the six countries. In five of the countries, however, road haulage employs more than the
automotive sector, the exception being Germany which, as Chapter 3 has confirmed, has an
especially large automotive workforce . The numbers in road haulage also appear to be growing
in each of the six countries, whereas they are static or declining in automotive and finance.
As well as being a significant employer, road haulage also plays a critical role in the movement
of goods in each of the countries. In the four countries for which estimates were reported, Spain,
France, Finland and the UK, road transport accounted for the carriage of approximately fourfifths in the first two and around two-thirds of goods in the second two. The overall figure for
Europe is probably at the higher end of this scale.
Also significant is that road haulage is perhaps unique in the extent to which labour and capital
are mobile across national frontiers. Drivers are capable of travelling considerable distances in a
single trip, very often being available to return via several countries from which they can seek
loads. In the wake of the deregulation of the sector, it is also relatively easy for a company to set
up operations in another country and/or employ drivers from which ever country pays the least.
The threats and opportunities that European integration in general and EMU in particular bring
65
for greater cross-national penetration are therefore virtually unparalleled. Yet, at the same time,
road haulage is extremely heterogeneous and massively fragmented, making overall
generalisations especially difficult. In some activities, EMU is changing the face of the sector,
whereas in others it is having virtually no impact for the time being.
Table 14 outlines details of the case study companies in road haulage. It will be seen that they
range from SMEs to the large multinational companies. The choice of case studies reflects the
composition of the sector, which is very different from automotive and finance.
An extremely heterogeneous sector
For organisational purposes, road haulage can be divided into two main sectors: ‘hire-or-reward’
and ‘own account’. Basically, the first, which was the main focus of the national investigations,
covers companies whose sole or main business is road haulage. The second embraces the road
haulage operations of companies whose primary business is not in transportation but, for
example, in manufacturing or retail,. Nearly two-thirds of road freight is carried by the growing
‘hire and reward’ sector and around a third by ‘own account’ operators
Some idea of the range of activities undertaken by ‘hire and reward’ operators can be gained by
looking at the specialist business groups into which the membership of the employers’
organisation in the UK, the Road Haulage Association, is divided. There are no fewer than 12:
•
Agricultural and food
•
Car transporters
•
Caravan hauliers
•
Express parcels, warehousing and distribution
•
General haulage
•
Heavy haulage
•
International
•
Livestock carriers
•
Milk carriers
•
National tipping services
•
Tanker
•
Waste management
66
Market, ownership and internationalisation of the road haulage case study companies
Country
Finland
no. of employees
sub-sector
market
France
no. of employees
sub-sector
market
Germany
no. of employees
sub-sector
market
Netherlands
no. of employees
sub-sector
market
Spain
no. of employees
sub-sector
market
UK
no. of employees
sub-sector
market
Company
Schenker BTL
2,300
haulage & logistics
Scandinavia
Germany (Stinnes/Veba)
Expaq
1800
parcels
France )
France
Deutsche Post
250,000 world wide
mainly post and parcels
international
Germany
Van Gend & Loos
4,150
dry goods haulage
Benelux
Germany (Deutsche Post)
MRW
4,200 (including franchisees)
parcels and logistics
Spain and Portugal
Spain
Christian Salvesen
14,000
logistics & warehousing
Europe
UK
Company
Beweship
160
haulage & logistics
Scandinavia, Germany Baltic States
Finland (private company)
Nicholas Industry
150
vehicles and handling systems
international
France
Schenker BTL
6,700 (20,000 world wide)
general haulage
European
Germany (Stinnes/Veba)
DHL
1,800 (60,000 world wide)
parcels
domestic
Brussels (US owned)
Azkar
2,700
general road haulage
Spain, Portugal and S. France
Spain
Barbour-European
60
international road haulage
Europe
France (Giraud)
Company
Kaukokiito
250
haulage & logistics
domestic
Finland (private company)
Sotrapoise
135
general haulage
regional
France
DHL
2,500 (60,000 world wide)
parcels
Germany
Brussels (US owned)
Hays Logistics
900 (21,000 world wide)
haulage & logistics
Netherlands
UK
TNT
500 (1000,000 world wide)
parcels
domestic
Netherlands
Andrew Wisehart
60
international road haulage
Europe
Scotland (private company)
67
(An interview was also conducted with a fourth company (GroContinental Ltd.), which is a privately-owned company based in Shropshire. This specialises in refrigerated transport, with a substantial
proportion of its turnover and profits coming from storage operations. It has around 50 employees.)
Table 14
Economies of scale and market entry barriers in general road haulage are fairly low, which also
makes for an extremely complex ownership structure. The following statement from the Road
Haulage Association in the UK is also a useful starting point for helping to explain the
complexity:
‘The RHA represents some 10 000 member companies throughout the UK, with a total road
strength of over 100 000 vehicles. Our membership spans every size and kind of road haulage
operation, from largest companies with thousands of vehicles, right down to the one man ownerdiver operation. This broad spectrum includes every conceivable type of freight distribution
operation, from simple delivery services to the provision of highly sophisticated total logistic
support services for clients – both nationally and internationally.’
Especially noteworthy is that road haulage in each of the six countries is massively fragmented.
In each case, the overwhelming proportion of employers is small in size. In Finland, for example,
around 700 of the 1,000 members of the employers’ organisation (ALT) have less than ten
employees. In France, employers with less than a hundred employees account for two-thirds of
total employment. In the Netherlands, nearly 60 per cent of companies have four or less
employees. In Spain, 80 per cent of enterprises involve owner-drivers, while 70 per cent of those
with employees have less than 10. In the UK, three-quarters of the membership of the RHA have
10 vehicles or less and half have three trucks or less, the average being around 4.7.
At the same time, however, road haulage is also an increasingly concentrated sector. Accurate
figures are not available. Several of the national reports nonetheless made the observation that
there had been a considerable process of mergers and takeovers in recent years that had been
encouraged by the coming of the single European market. A number of major companies were
beginning to emerge such as Christian Salvesen, Deutsche Post, DHL, Hays, TNT, United Postal
Services and others. As the group human resources director of Christian Salvensen reminded us,
it is a mark of the international concentration taking place that Securicor has been taken over by
what was the Deutsche Post, while TNT and the Dutch Post Office had joined forces to create
TNT-Post.
As the Dutch report explains, an increasing number of large distributors from the US and the EU
are basing themselves in the Netherlands. In the last ten years foreign companies have taken over
most of the major domestic players. The big companies are becoming progressively more
focused on planning (coordination). They take over logistics and warehouse activities from their
customers and contract out the actual transport to either smaller companies or own-account
drivers. Price comparisons determine their choice of sub-carrier. Some of the companies have
almost completely hived off the actual transport and are now concentrating solely on logistics.
This means that the large operators, the small family-owned businesses and the owner-drivers are
also very often mutually interdependent. The large operator may subcontract to his smaller
counterpart who, in turn, may have owner-drivers as part of his regular fleet. Large and small
operators alike may call upon agency drivers when in need.
A particular example of such interdependencies is provided by one of our Spanish case studies,
MRW, which is a franchising company. Altogether, there are 528 franchisees, which employ most
68
of the organisation’s workforce of some 4,200 in a range of haulage activities. MRW as the
franchisor sets prices, lays down guidelines, coordinates operations and provides know-how and
technical assistance. It even establishes average parameters that are used as performance
indicators, although it does not determine sales objectives for the franchisees. A key role in
running the organisation is played by a consultative committee in which franchisees are
represented and where they can make suggestions and express their concerns.
A further factor contributing to the heterogeneity of the sector reflects the relationship with
customers. Essentially, road haulage faces a derived demand for deliveries of raw materials,
components and finished goods. Not only, therefore, is activity highly cyclical, reflecting general
levels of economic activity, but it is also heavily dependent on the performance of specific
sectors and/or regions. Road hauliers, in other words, are far from being masters of their own
destiny.
The rise of ‘hire and reward’
The expansion of road haulage has been paralleled by significant changes in the sector’s
structure. One is the long-term decline of own-account haulage in favour of hire and reward. In
the UK, for example, hire and reward accounts for more than two-thirds of the tonnes per
kilometre. In Spain, it is even higher at nearly 90 per cent.
The explanation for the shift lies in changes in the organisational structures of major customers
such as divisionalisation, budgetary devolution and an increased tendency to apply market
principles to business activities, leading to the subcontracting of so-called ‘non-core’ activities
such as distribution. To quote Smith (1999) in one of the extremely rare studies of industrial
relations in road haulage,
‘The advantage of hire and reward haulage became more apparent as companies reformed their
organisational structures … in order to increase transparency of costs and profits … And modern
information systems permit the supervision of goods distribution without direct ownership of
transport … Thus own-account transport has been subjected to close scrutiny, leading in many
instances to contracting-out.’
Road haulage has always been a highly competitive sector, reflecting features such as ease of
entry and the small economies of scale. The growth of ‘hire and reward’ has considerably
intensified competition in recent years, however. The externalisation of previously in-company
transport fleets has itself added to the number of domestic players. Meanwhile, increasing
competition within the retail and manufacturing sectors means that the two major groups of
customers for road hauliers have themselves been anxious to cut their costs to the bone. This has
put great pressure on the prices that road hauliers can now demand for running these businesses’
transport operations.
Another change is the emergence within the hire and reward sub-sector of a growing dedicatedcontract distribution sector composed of companies which provide or manage an integrated
service comprising storage, break-bulk and packing, haulage, and supply-chain management. In
the words of the Christian Salvesen 1999 Annual Report and Accounts,
69
‘Companies want to rationalise their supply chains to cut costs and increase flexibility. They want
improved routing and scheduling, better use of return loading and more efficient order and
delivery cycles. Increasingly, they find that the most efficient way to achieve these benefits is to
outsource the entire logistics operation, gaining access to efficient, flexible networks and highquality information systems.’
The extent of the development, sometimes known as ‘third party distribution’, was underlined by
Christian Salvesen’s group human resources director. It did not just involve transport by any
means. He used the term ‘sequencing’ to describe the process whereby, in industrial logistics,
different parts were brought together and even sub-assembled before being passed on to their
destination to meet the tight deadlines of just-in-time manufacture. Major clients included AgfaGevaert, Ford and General Motors, Rockware Glass and Mobil Oils. In the case of food and
consumer logistics, it could mean joint ventures with major manufacturers as well as retailers to
run automated chilled warehouses – he instanced the examples of Danone in Portugual and
Spain, Galbani in Italy and Unilever in the Netherlands.
The logic of companies such as Christian Salvesen moving into this market is also clear. In
general road haulage, profit margins are very small, reflecting the intense competition and the
presence of a large number of privately-owned family firms which, unlike publicly listed
companies, do not have to worry about stock market pressures. In third party distribution, both
the barriers to entry and the profit margins are much greater – the barriers to entry because of the
specialist capabilities in information systems technology and warehousing and the profit margins
because of the high value-added factor of the services involved. Also important is that contracts
are much longer term than in the case of general road haulage. Typically, they would be from two
to five years’ duration. For example, this was the case of Christian Salvesen’s recent success in
winning the contract to be Ford’s sole supplier for after-market distribution services to some 350
dealers. This was described as a multi-million pound contract that would last from 1999 to 2004.
The impact of the single European market
Also contributing significantly to the increasing intensification of competition is the removal of
barriers to cross-border activity within the EU, such as the ending of customs checks and
cabotage (that is the system whereby hauliers from one country had to have a licence to operate
in another). In general road haulage, several of our respondents emphasised that these
developments had been mixed blessings. They could not but fail to welcome the end of the
detailed customs checking that had prevailed at borders, speeding up delivery times considerably.
At the same, however, they reported that the greater ease of movement had not only encouraged
their customers to expect ever-tighter delivery schedules, but also opened their market to entrants
from other countries.
Such entrants, it needs to be emphasised, do not just come from other EU member countries.
Again, several of our respondents said that a significant factor in the intensifying competition
was the entry of hauliers from countries such as Bulgaria, Romania and as far as afield as
Turkey. Some EU-based hauliers – the name of Willi Betz cropped up in several conversations –
were reputedly relocating some of their operations to these countries. An especially key
70
consideration was the relatively low rates of pay of drivers, which made it possible to undercut
the prices that EU-based companies could quote.
The managing director of Andrew Wisehart Ltd., which is based in Scotland, told a recent story
that illustrates the interpenetration of markets as well as the interdependencies. He had been
asked to make an urgent delivery by one of his large customers to be completed by the end of the
month, which was 24 hours away. Try as he might, he could not muster enough trucks from his
regular sources, which included some 20 or so owner-drivers. He therefore called an agent in
Dover, who arranged to have 10 Turkish drivers in Turkish-registered trucks on his doorstep 12
hours later. They had just completed a delivery of clothing in the Manchester area in the north of
England and had registered with the agent in the hope of securing further loads to deliver en
route home to Turkey.
It is difficult to assess the extent of the interpenetration. According to the UK Government, the
impact of this on UK operators is limited by the fairly peripheral geographical position of the
market, with the average length of haul only 91 kilometres, according to the 1998 Continuing
Survey of Road Goods Transport. The then Transport Minister John Reid (1999) quoted figures
suggesting that the amount of local cabotage carried out by foreign-registered trucks was
‘significantly less than 1 per cent’. Figures from the Transport Statistics Freight Division of the
Department of the Environment, Transport and the Regions (DETR) report that over half a
million goods vehicles travelled to mainland Europe from Great Britain in the first quarter of
1999, 39 per cent of which were foreign-registered vehicles (Source: Reid, J., 1999).
International transport to the Netherlands from three European countries and vice versa gives
another indication of the level of internationalisation. As Table 15 shows, Germany, France and
Belgium account for almost 90 per cent of the bilateral transport between the Netherlands and
the Member States of the EU. The German and Dutch shares of the transport of goods between
the Netherlands and Germany are reasonably balanced. However, Dutch transport companies
have a dominant position in the transport of goods to and from France and Belgium.
Table 15
International bilateral transport to and from three EU countries in 1997
Germany
Belgium
France
Total bilateral
Transport
From the Netherlands
(x 1000 tonne)
Share EU
country
To the Netherlands
(x 1000 tonne)
Share EU
country
23 053
12 510
4 738
50.0 per cent
27.1 per cent
10.3 per cen
23,795
11,583
3,680
55.1 per cent
26.8 per cent
8.5 per cent
46 128
43,190
Source: Cijfers, Transport, pp. 60-66.
The significance of this interpenetration depends on the particular niche of the market in which
companies operate, as will be illustrated by drawing on our interviews with the four company
representatives in the UK. Thus the two small dry goods hauliers had experienced both a
71
substantial increase in their own international activity as well as increasing competition from
foreign entrants. Arguably, however, just as important as the competition from new entrants, if
not more important, were the ups and downs of local manufacturers, who were their major
customers.
Views about the state of the market and future prospects also reflected their ownership. The
managing director of the company recently acquired by Giraud, the large French haulier, was
looking forward to a future in which his organisation would be able to enjoy the benefits of being
part of a pan-European operation at the same time as having a significant measure of autonomy.
His fellow managing director of the independent company, by contrast, was looking forward to a
more uncertain future in which the prospects for manufacturing in the immediate region were
likely to be the dominant consideration – the closure of a local tyre manufacturer meant the loss
of 30 per cent of the company’s business which he and his colleagues were urgently seeking to
replace.
The position of our third company was different again. The business, the managing director
explained, was roughly divided between food storage and distribution, with the extent of the
international operations growing in proportion to the increase in the company’s overall activity.
The bulk of the company’s profits, however, came from storage. Indeed, he reckoned one of the
major benefits of his trucks was the advertising they provided for the business. He was also fairly
confident about the future, believing that the niche market which he had achieved was largely
immune to international competition. He was certain, however, he would be seeing things very
differently if the business was wholly reliant on road haulage.
In third party distribution, where Christian Salvesen operates, sector analysts were predicting,
even before EMU, that ‘with a large part of the growth potential of the domestic contract
distribution market already exploited, the large transport companies whose domain this is must
seek opportunities overseas, notably in the single market’. With the coming of EMU, the logic of
internationalisation is overwhelming. In the words of the 1999 Christian Salvesen Account
Report and Accounts,
‘To take full advantage of the single market, businesses are consolidating across Europe. As they
adopt European manufacturing and distribution strategies, they want to work with suppliers who
can operate on the same scale. They are concentrating production and regional distribution in
fewer, larger facilities to achieve economies of scale – so components and finished goods are
crossing larger areas and greater distances. They are adding links to the supply chain by subcontracting non-core operations. And they demand more frequent deliveries to reduce their
stockholding. These factors are driving growth in the mainland transport sector ahead of the rest
of the economy and the trend is snow-balling.’
Christian Salvesen’s own response could not be more clear-cut. The 1999 Annual Report and
Accounts has as its title Creating partnerships across Europe. It explains that
‘Our home market is no longer the UK. It’s the European Union … we aim to deliver superior
shareholder returns by becoming the technology and service leader in European logistics. Our
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strategic objective is to build a European-wide business through a combination of acquisitions,
joint ventures and organic growth.
… By being focused on Europe, we’ll be able to offer the broad European coverage that clients
increasingly require. We can leverage our existing client relationships to provide shared user
networks – which will ensure a flexible cost base, maximise vehicle fills and minimise empty
mileage so that we use assets efficiently, and minimise environmental impact.’
The company has already adopted a new corporate identity to ‘unify branding and create greater
awareness of our size and capability across Europe’. Overall, the business is being re-shaped to
‘build a focused, integrated logistics company business with a clear strategy for expansion into
mainland Europe’. As well as a change in the livery of its transport fleet, the first manifestations
of the strategy have become apparent. Christian Salvesen has just acquired Gerposa, a major
industrial logistics company with national coverage in Spain, and is developing closer ties with
Wohlfarth in Germany, in which it already has a major stake and an option to acquire the whole
of the business in the future. Other acquisitions are in prospect.
Christian Salvesen is, of course, not the only company with these ambitions. A number of major
players were moving in a very similar direction as has already been indicated. Similar things
were happening in the parcels business, where the recently-privatised German (Deutsche Post)
and Dutch post offices were flexing their muscles. The former had taken over Securicor as well
as Danzas, while the latter had recently bought TNT. The number of players in the third party
distribution subsector may therefore be much fewer than in general haulage and the returns
greater. Competition is nonetheless intense.
Discussions with the head of Price Waterhouse Coopers’ EMU Unit, who specialised in the road
haulage sector, confirmed what was apparent from several of the interviews. The transparency of
prices that the next phase of the introduction of the euro would bring in 2002 could not fail to
intensify the competitive pressures highlighted earlier. Coupled with the growing experience of
operating in a single European market that key actors were acquiring, the effect would be to give
further impetus to the trends and developments already taking place. Although the sector as a
whole was likely to continue to grow, the increase in activity was likely to be disproportionately
greater in hire and reward than own account haulage, reflecting the pressures on companies to
expose non-core operations to market competition. There was also likely to be greater
fragmentation and specialisation at the same time as greater concentration, as road haulage
companies jockeyed for the best position to suit their circumstances. Interpenetration of markets
was also likely to increase considerably in both general road haulage and third party distribution,
as the single European market becomes ever more a reality.
If the pace of change was the imponderable, the source of change was very clear. Although
developments on the supply side, such as an increase in the number of new entrants from central
and southeastern Europe, would continue to be an important consideration, it is likely to be
customers’ demands that provide the main impetus. Two considerations are important here. One
is the speed with which the retail sector can become Europeanised. At the moment, even the
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largest retail companies in EU countries are mainly domestic in operations. If, however, they
follow the pattern taken by manufacturing and go ‘European’, the results could be dramatic. The
move of the giant US retailer, Wal-Mart, first into Germany and then into the UK, could be the
catalyst here. Pan-European retailers are likely to seek to build relationships with pan-European
hauliers rather than their domestic counterparts.
The other consideration is the growth of e-commerce. Imagine, explained the Christian Salvesen
group human resources director, if e-commerce took off in the way that many commentators
were predicting. It was not just that the nature of shopping could change significantly, with many
more goods being dispatched directly to people’s homes rather than being carried there by
shoppers themselves. It could radically alter the way in which the supply chain operated in both
manufacturing and services. In his words, e-commerce represented a ‘huge business opportunity’
for the road haulage sector, exaggerating the trends and developments already identified.
None of our respondents reported any major issues or problems concerning the practicalities of
introducing the euro. All the companies, including those in the United Kingdom, had introduced
arrangements for the payment of invoices in euros, which had also required training of the
employees involved. In most cases, customers had the option of paying in the existing national
currencies or the euro. So far only one company, Van Gend & Loos in the Netherlands, could be
said to be a ‘full’ euro company in the sense that all internal accounting and internal budgeting
were carried out in euros and all customers were charged the same euro tariff for services,
irrespective of the different national composition of costs.
Van Gend & Loos also provides us with an interesting insight into the kind of debates and issues
that are likely to be repeated in many companies over the next couple of years. A project group,
including representatives of the human resources function, worked on an action plan for a whole
year using one of the company’s empty locations as a test facility for the necessary information
technology systems and its compatibility with those of major customers’ software. The group
was anxious to include the conversion of the salary administration to the euro in its programme,
but the human resources function urged caution for three main reasons:
•
the tax department and the organisations for social security were not yet able to receive sums
of money in euros;
•
a new version of the personnel information system was expected to be installed in 2000,
which meant that it made more sense to complete the conversion to the euro in one
operation;
•
The national campaign in the Netherlands about the transition to the euro on 1 January 2002
had not yet started and so employees had not yet been prepared for the transition by the
national media.
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As in the case of the other two sectors, there was a mixed pattern so far as the dual display of pay
in euros and the national currencies was concerned. Setting the UK companies aside, the sample
split roughly two-thirds versus one-third in favour of dual display. Each of the countries was
represented in the two groups, however, which means that the country dimension does not appear
to be important. The critical factor, it seems, is the overall progress that has been made in
preparation for the euro, more companies in road haulage than the other two sectors saying, at
the time of the interviews, that they had yet to develop detailed plans.
As for the degree of involvement of employee representatives in the implementation of the euro,
this largely reflected custom and practice in each of the countries. In France and Spain, there
appears to have been little if any dialogue with employee representatives over the issue. The same
is true of Finland. In the Netherlands, in the two companies that were in the advanced stages of
preparation, the message from management was very clear. They had and would be keeping
employees and their representatives fully informed. They did not, however, see implementation
of the euro as an issue for negotiation and this included the substance of the conversion, such as
the rounding-off of sums of money. The works council representatives did not disagree with this
approach, but insisted that they wanted to be involved in the discussions on the staff information
plan. It was only in the German companies that negotiations with works councillors were
expected, although it was not envisaged that these would give rise to any major problems.
Our final comments in this section are reserved for DHL because the case illustrates the wider
implications that the implementation of the euro can have for the relationship between
headquarters and local management in large MNCs. As the Dutch report explains, preparations
for the introduction of the euro were the responsibility of a project group within the finance
directorate of the European headquarters in Brussels, where the priority was the introduction of
the option for customers to choose to be invoiced in euros. In the process, however, the European
headquarters human resources function was involved in sending a checklist concerning the
preparation for the introduction of the euro to all the human resource departments in Europe,
which the latter were requested to complete and return. It was a matter of comment that this was
one of the first times that the European headquarters human resources function in Brussels had
directly involved itself in human resources policy in the national subsidiaries.
The implications for the processes of industrial relations
Sectoral level
There was no evidence or suggestion that EMU had yet had an impact on existing sectoral-level
arrangements. True, as in finance, EMU is encouraging the emergence of the large pan-European
company and this is encouraging the development of organisation-based employment systems.
The number of such companies in road haulage is a drop in the ocean, however, compared to the
large number of SMEs involved for whom the sectoral agreement continues to serve the
important functions of establishing a level play field and a series of useful benchmarks. Also
some of the large companies presently prefer negotiations at the level of individual business
units.
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There also appears to be little use of cross-national comparisons in sector bargaining and also
little collection of cross-national data, which is hardly surprising given the overwhelming
fragmentation of the arrangements in road haulage. As Table 16 shows, most of the sectoral
agreements are district or regional in their coverage as opposed to national. At most, it seems,
passing allusions are made to the situation in other countries during negotiations, but these seem
to have little effect on outcomes.
Table 16
Collective bargaining arrangements and EWCs in the road haulage case study
companies
Country
Company
Company
Company
Finland
EWC
Schenker BTL
• Sectoral agreement
• Yes (Veba)
Beweship
• No EWC
Kaukokiito
• No EWC
France
EWC
Expaq
Nicholas Industry
• No collective agreement • Sectoral agreement +
• No EWC
• No EWC
Sotrapoise
• No collective
agreement
• No EWC
Germany
EWC
Deutsche Post
• Company agreement
• In process of formation
Schenker BTL
(district)
• Yes (Veba)
DHL
• Company
agreement
• Yes
Netherlands
EWC
Van Gend & Loos
• Company agreement
DHL
• Yes
Hays Logistics
• No EWC
Spain
EWC
MRW
Azkar
• Depends on franchisees • Sectoral agreement
• No EWC
(provincial)
• No EWC
TNT
(provincial)
• Yes
UK
EWC
Christian Salvesen
• Business unit
Barbour-European
Andrew Wisehart
• No collective bargaining • Company
• No EWC
discussion with
shop stewards
• No EWC
Ironically, the one example of ‘copycat’ activity quoted involved employers rather than
employees. Road hauliers in the UK have been complaining bitterly about the level of tax on
diesel fuel and vehicle excise duty. The smaller operators, for whom re-locating and/or buying
fuel in mainland Europe are not practical options, are especially incensed. Their response has
been to take a leaf out of the book of their French colleagues and to take direct action. Some
1,500 trucks were involved in demonstrations in March 1999, which stimulated the creation of a
haulage industry forum chaired by the transport minister. In May 1999, hauliers disrupted traffic
on the orbital London motorway, the M25, in protest at the increase in duty and increased
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competition from abroad. In July 1999, the RHA itself organised a demonstration when over 800
trucks converged on London’s Park Lane.
Our respondents helped to put the general picture into perspective. Several commented there
were differences in hourly rates of pay between different districts, reflecting the fragmentation of
the sector. In some cases, there were even differences within the same company, reflecting the
way the company had grown through acquisition. It was not therefore surprising that there was so
little cross-national comparison. Most of our respondents also did not foresee any major changes
in the immediate future, except in so far as there might be an international dimension. Some
confessed to not even thinking about the matter, pointing out that they had many more urgent
things on their mind such as the impact of the proposed limits on drivers’ hours that the EU was
about to introduce in the form of a directive. The major exceptions were in the Netherlands. Here
there were worries about the impact of the competition from foreign companies and drivers
above all from central and eastern Europe. In particular, trade union representatives expressed
fears about maintaining the binding nature of the existing sectoral agreements, which provided
for standard terms and conditions of employment.
Thus far, the picture is similar to that in automotive and finance. It was very different, however,
in the case of views about developments at EU sector level. Here there appears to be greater
support for the idea of cross-national developments than in automotive or finance. At first sight,
this might appear to be rather odd, given much of what has been said about the road haulage
sector. Yet it is not so surprising when the potential for labour and capital is taken into account.
Several of our respondents, both management and trade union representatives, expressed doubts
about the ability to sustain existing national industrial relations systems in the sector in the light
of the competition from central, eastern and southern Europe, which is expected to intensify with
the accession of more members states in the years to come. An EU sector-level agreement would
be one way of trying to ensure that there was a levelling up of standards rather than a levelling
down. Interestingly, too, this was not just the view of our continental European respondents. The
national officer of the T&G in the UK saw an EU sectoral agreement as the most effective way
not only of maintaining standards of pay and conditions but also safety.
Road haulage, it also needs to be remembered, already has considerable experience of EU sector
social dialogue. The need to grapple with EU regulations in the area of safety, drivers’ hours,
etc., means that there is perhaps a greater recognition of mutual interests than in automotive or
finance. Equally, however, no one is expecting that EU sector regulation is going to be easy to
achieve. As well as the fragmentation of existing national systems, the complex arrangements of
the existing EU-level social dialogue are seen as a problem. Currently, both road haulage and
passenger transport are combined. In the case of road haulage, it embraces both employed and
self-employed drivers, making it difficult to arrive at a consensus. Differences in the levels of
wages and conditions are also seen as creating problems. Indeed, it is because of these
differences that the Dutch trade union representatives believed that the future regarding wages
rested with company level activity.
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It is also important to mention that there may be a Nordic dimension to the internationalisation of
collective bargaining in road haulage, that is cooperation between the Nordic countries,
especially between Finland and Sweden. The Finnish national report reminds us that the Nordic
transport sector trade unions planned to hold a conference in autumn 1999, to which the
employers’ organisations and the representatives of the respective ministries were invited, to
discuss the idea of a Nordic collective agreement for the sector. In particular, as well as the
general concept of a Nordic collective agreement, the trade unions wanted to discuss having a
common agreement to cover the terms of employment on regular transport between two Nordic
countries. In the event, the conference was cancelled due to a taxi strike in Sweden and the
refusal by the employers to participate under these conditions. As things stand, the feeling of the
employers is that a Nordic agreement runs contrary to the principle of subsidiarity and the
general desire to decentralise the negotiation system, rather than to centralise it to a new level.
Company level
As will be clear from what has already been said, large multinational companies are not yet a
feature of road haulage to the same degree as in automotive and finance. In the vast majority of
cases, therefore, the issue of cross-national comparisons within companies by either managers or
employee representatives does not really arise. It follows that EWCs are also extremely rare in
road haulage. Overall, the number scarcely reaches double figures. Table 16, which has outlined
the collective bargaining arrangements in each of the case study companies, also confirms
whether or not a European Works Council was present.
In those few, mostly third party distribution, companies that are multinational and have EWCs,
there is a varied pattern. In some cases, these are very early days in the strategic direction which
the company’s top management has charted. Christian Salvesen and Deutsche Post, where EWCs
are only in the process of being set up, would be examples.
The Christian Salvesen group human resources director explained that his company had set up a
EWC under Article 13 of the directive. The decision had been taken to base this in Belgium,
however, and not to include representatives from the UK in the first instance. Following the
signing by the UK Government of the social chapter, the company had to incorporate its UK
operations and he was only now in negotiation with local T&G representatives about the number
of seats the UK representatives would get. As for comparisons of pay and conditions in different
EU countries, he confirmed that they were only beginning to be an issue. Indeed, he said that he
was having prepared detailed fact sheets on employment conditions in the different countries in
which the company operated. His major problem here was that he did not yet possess the
infrastructure to get such data – the headquarters personnel function was newly-established and
extremely small.
The one area where there appeared to be the first signs of the issues that might be expected to
arise was that of management salaries, reflecting a growing European labour market for top
managers, in particular in third party distribution. For example, Christian Salvesen had recently
made a number of very senior appointments, from among a range of nationalities, to spearhead
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their European strategy. Currently, the pay of the individuals concerned was set in the currency of
the country of operations. There had not as yet been any request to be paid in euros, but the
human resources director was sure that this would not long in coming. If the company was to
fulfil its European strategy, it would necessarily mean the recruitment of a cadre of European
managers in the future. He was therefore envisaging a graduate intake drawn from a number of
countries. Inevitably, therefore, their pay and conditions would have to be set at a European level.
A different picture emerges in the case of TNT and DHL, which are longer established
multinational companies. In the case of TNT, the idea of establishing homogeneous performance
indicators for all the centres in the euro-zone has not been adopted. Nevertheless, there are
coordination measures and certain aspects related to human resources policy are common to all
the centres of the company (located in any country). Common guidelines are set, in regular
meetings, by the delegates of the different geographic areas. Although criteria are binding for all
countries, the head of each human resources department has a certain margin of manoeuvre that
allows him/her to adopt other measures in keeping with the characteristics of the country.
As our Dutch respondent explains, although the human resource function currently enjoys a great
deal of autonomy, DHL is a centrally run company. Many transactions and activities are
standardised. One example is the percentage of parcels that has to be delivered by 10 a.m. and
12 a.m. in a particular location. Each country must submit a budget to Brussels, with an
overview of the expected expenditure and income. Brussels then gives the country a target,
whereby expenditure must remain within the margins laid down. The benchmarking of
productivity and workforce in the different DHL subsidiaries is second nature for the company.
Many activities are standardised, such as the number of deliveries in a region. If the number
increases beyond a certain limit, a new region is automatically formed and a new member of staff
employed.
The management in Brussels is going to place more emphasis on harmonisation of services and
operational management. Harmonisation means furthering the company-concepts of ‘common
ways of working’ and ‘operating in the best way everywhere’ (Forum report, 1998). A Global
Service Commitment (GSC) is to be introduced. Another idea is the transfer of financial and
information technology support from the country organisations to one centralised European
location.
There is a significant reason for this. The growth of worldwide turnover is 3 per cent lower than
the set objective of 20 per cent. Furthermore, labour costs are ‘worryingly high’ as they now
represent 37 per cent of total expenditure. Turnover may have risen but this has not lead to higher
profits, because expenditure has also increased.
Looking to the future, two views emerged about the possible directions that the large third party
distribution companies might take as they become increasingly pan-European in their operation.
One, in effect, would be to extend existing developments. Instead of employing their own drivers,
companies would subcontract the running of transport fleets, using hauliers from different
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countries depending on the cost. The other would be to introduce Euro-company arrangements as
a means of both maximising the benefits of an increasingly valuable resource (see below for
further details) and insulating themselves from the potential disruption that existing fragmented
national arrangements can cause.
Conclusion
Overall, there appears to be less of a trend towards company bargaining in road haulage than in
either the automotive or finance sectors, reflecting the very large number of small businesses.
There are signs of such a trend in some of the larger companies that are beginning to emerge in
third party distribution, however. The reasons are also very similar to those in automotive and
finance – the need for the larger employer to have greater flexibility and more detailed regulation
of specific activities.
For the foreseeable future, it is not envisaged that there will be major changes in existing sectoral
arrangements, most of which are at local level, although there may be some pressure to relax
their binding nature. A continuation of the current two-tier arrangements looks the most likely
course, that is sector bargaining combined with company bargaining in some cases. Some form
of sectoral arrangement would appear to have widespread support, reflecting the sector’s
fragmentation. At the same time, however, the larger companies in third party distribution might
be expected to develop their company arrangements even further.
Unlike in the automotive and finance sectors, where there is widespread opposition to EU sector
bargaining, especially on the part of employers’ representatives, in road haulage there is some
sympathy for the idea. There are both employers’ and trade union representatives who are
concerned about the viability of existing national systems, above all in the light of the accession
of countries from central, eastern and southern Europe. An EU sector level arrangement is seen
as a way of helping to ensure that there is a levelling up of standards rather than a levelling down,
although no one is underestimating the difficulties that would be involved in achieving such an
agreement. Similar sentiments appear to have prompted the trade unions in the Nordic countries
to propose a regional agreement covering their countries.
In the small number of Euro-companies, there is as yet even less activity at the European level
than in automotive or finance. EWCs are few in numbers and are only just beginning to be
established. There is nothing like the use of ‘coercive comparisons’ that there is in automotive
and only a few cases of the human resource policies and practices that are emerging in finance.
Conceivably, some third party distribution companies may embrace Euro-company arrangements
as a means of insulating drivers from the existing fragmented national arrangements. More likely,
however, is that that they will subcontract responsibility for haulage to other companies, focusing
on logistics operations.
Some concerns were expressed about the implications for existing levels of pay that the greater
transparency and increased competition of the euro would bring. This was above all true of the
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Netherlands, which has the highest levels of pay for drivers among EU countries. Yet it was also
recognised that there would be strong forces working in the other direction, including the
expected increase in business demand, the widespread shortage of qualified drivers and the
increasing requirements in terms of their skills and competences. Other things being equal,
productivity was likely to be the key. In the circumstances, though it may be wishful thinking,
several of our respondents expected that the pressures to level up both pay and productivity
would probably be greater than those to reduce pay.
Other than in the case of managers and white collar employees, where a tendency to more
performance-related pay was expected, no major changes in pay systems were envisaged. A
strong inventive element, it was pointed out, was already a feature of driver’s pay, typically
related to the time taken to achieve specific jobs.
The long hours typically worked in the sector have long been a major bone of contention for
trade unions in several of the countries. Here much depends on the outcome of the discussions on
the proposal by the European Commission, currently under consideration in the European Works
Council, on regulating working time in the transport sector. According to this, the maximum
working hours of drivers would be limited to 60 hours per week, while over a rolling four- month
period the maximum would be 48 hours.
As the author of the Finnish report reminds us, there is fierce opposition in some countries
against some stipulations being included in the current form of the directive proposal. The
employers are in general against too much EU-level regulation, basing their argument on the
principle of subsidiarity. Especially disputed is the position of owner-drivers. Many employers
are against their inclusion within the working time regulation, while the employees are strongly
in favour of it on two grounds. One is traffic safety and the other is to neutralise the competition,
trade unions being in favour of increasing the average size of road haulage companies. The
employers point out that owner drivers have been covered by national regulations on the driving
and rest times since 1994.
In the case of employment, the point has already been made that an increase in road haulage
activity is expected as a result of the coming of EMU and the further development of the single
European market, with likely developments in e-commerce giving an additional boost. In these
circumstances, overall growth in employment in the sector is expected, although this could be
uneven reflecting the circumstances of particular business activities and/or the region in which
they take place. Not only that, but several of our respondents also made the point that the skills
and competences required of employees in the sector were increasing. It was not just a question
of a head office staff either, where a new breed of highly skilled logistics experts was emerging.
The skills and competences required of drivers were also increasing as more and more is
expected of them. The amount of investment in both their trucks (including on-board computers)
and the merchandise they carry is considerable, running into hundreds of thousands of euros.
Customers’ expectations are also changing. Increasingly, they want people who are well dressed
and well-spoken, which is very different from the traditional stereotype.
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Chapter 6
Multispeed ‘Europeanisation’: the three
sectors compared
Our task in this and the final chapter is to try to pull together the findings of the report. As some
of our national authors have emphasised, there is a need to be cautious in drawing conclusions.
Substantial though the research programme was, the number of companies on which the results
are based (54) is small compared to the total population. Moreover, these companies come from
six countries. Inevitably, there is enormous potential for different interpretations reflecting
contrasting scientific traditions as well as institutional arrangements.
In the event, there was a pattern to the findings. Significantly, too, the individual country did not
massively affect this. As Chapter 2 observed, the biggest differences between national systems of
industrial relations are to be found at national level. At sectoral and company level, processes
and outcomes tend to be more comparable, reflecting similar technology and market structures.
The focus in this chapter is on the comparisons and contrasts between the three sectors,
automotive, finance and road haulage, leaving Chapter 7 to deal with the report’s overall
conclusions and implications. Mindful of the difficulties of singling out the impact of one set of
changes from the many affecting the companies, discussion of EMU takes place within a
consideration of the wider developments taking place in their contexts. As with the proceeding
three chapters, the comparison of these three sectors is organised along three dimensions: the
changing economic context; the practicalities of introducing the euro; the impact of EMU on
industrial relations processes and outcomes, notably pay, working time and employment. Where
appropriate, the specific impact of the introduction of the single currency is highlighted as
compared with the wider process of market integration within the EU in which EMU is a
significant step.
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Considerable differences are evident both between and within the three sectors in the extent to
which they were internationalised before the implementation of EMU and the beginning of 1999.
Accordingly, the nature and intensity of the further restructuring and rationalisation that EMU
has unleashed varies between, and within, the sectors.
Internationalisation
The major automotive manufacturers have long integrated automobile manufacture across the
EU. The market is dominated by a handful of transnational volume producers. Further
internationalisation is moving in the direction of global integration of operations by the major
international players amongst our case studies: DaimlerChrysler, Ford, GM, Renault and VW. In
the face of world- and European- wide overcapacity, the cost and price transparency afforded by
EMU is intensifying competition further and with it pressure to rationalise capacity and reduce
costs. Similar pressures are also being felt by manufacturers of automotive components, but here
international integration of operations at European and global levels is not as developed. Until
recently, local sourcing by the major multinational producers has remained prevalent.
In finance, the mid-1980s deregulation of financial markets across the industrialised world has
stimulated the emergence of global-scale investment banks. Increasingly too, commercial
banking has become more internationalised as multinational customers have demanded a unified
banking service worldwide. In contrast, retail banking – which has been the main focus of our
case studies – remained largely differentiated according to the different domestic markets. To
some extent, the same picture held for the insurance part of the sector. The introduction of new
technologies in the shape of direct banking and insurance operations, either by telephone or
through the Internet, has profound consequences for costs and the organisation of retail banking
in particular.
In road haulage, both capital and labour are increasingly mobile across borders within Europe to
an extent that exceeds that in either of the other two sectors. However, the growing ‘hire and
reward’ segment of the sector on which our case studies focus remains extremely fragmented in
its structure, with small firms and self-employed drivers accounting for a significant proportion
of the market in all EU countries. Even the large multinational companies tend to have local
distribution arrangements with local hauliers. Only now are a few of these companies becoming
pan-European in terms of where operations are based, associated with the growth of integrated
logistics services for multinational customers.
Restructuring
The restructuring in each of the three sectors that EMU is promoting has both ‘external’ and
‘internal’ dimensions. The external dimensions take the form of a wave of mergers and
acquisitions, joint ventures and strategic alliances, as companies aim to establish and/or
consolidate a presence across the single European market. The internal dimension represents
signif icant re-organisation of production (and, where it had not already occur red,
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divisionalisation in management organisation) in response to significant competitive challenges,
which include but are not confined to EMU.
In automotive manufacturing, the combination of overcapacity and intensive pressures on costs at
global as well as European level has resulted in a further consolidation of ownership in the
industry. The latest developments, occurring while this report is being written, are GM’s
acquisition of a minority stake in Fiat and BMW’s decision to sell its Rover subsidiary with the
prospect of significant redundancies and even plant closures at the latter. Yet the European
Commission’s recent decision not to give approval to the fusion of Volvo trucks and Scania
indicates that further consolidation within the sector will also be shaped by considerations of EU
competition policy. It should nonetheless be underlined that the corporate logic of these
developments is more global than European. The major manufacturers are increasingly looking
to source their components on a European, if not worldwide, basis. In turn, this is leading to
consolidation amongst the major manufacturers in this part of the sector. Internal re-organisation
is less prominent amongst the major manufacturers, where production has long been integrated
across national borders. Amongst the components suppliers, however, pressure from the major
manufacturers to purchase entire components systems, rather than individual components, has
had fundamental implications for the organisation of production at some of our case study
companies, including Powerpacker and Valéo.
A global as well as a European logic appears also to be at work in the external restructuring that
is underway within the finance sector. That aside, differences from the automotive sector are
more evident than the similarities. An important dimension of the recent wave of mergers and
acquisitions is a consolidation of banks and insurance companies within national boundaries.
Thus, in France, Germany, the Netherlands and Spain virtually all the leading banking groups
have been involved in within-country mergers or acquisitions (or attempted consolidations) in the
past few years, as have our two case study banks in Finland and NatWest in the UK. In the first
instance, at least, EMU would seem to be stimulating the creation of ‘national champions’ in
retail and commercial banking, and also in insurance, better able to compete within the single
market. It is difficult if not impossible, however, to unravel the effect of EMU from that deriving
from the opening up of direct banking as a new mode of service delivery. As compared with this
national consolidation, cross-border mergers and acquisitions have been less prominent.
Integrated delivery of banking services to customers across the EU would thus appear to be still
some way off.
Insofar as there is a cross-border dimension within the EU to external restructuring, different
national sectors appear to be more or less active. Thus, whereas banks in Finland, the
Netherlands and Spain have acquired or merged with banking operations in other European
countries, this is not so much the case with those in France, Germany or the UK. Banks in
Germany and the UK further stand out in the extent to which their international strategies are
global rather than European in orientation – something that is especially evident at Deutsche
Bank and at HSBC. A cross-border European dimension to external restructuring is more evident
in the insurance, as compared to the banking, sector.
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A further dimension to the restructuring which is taking place, with both external and internal
dynamics, is the extent to which, like the automotive component suppliers, the traditional
product portfolio of banks (and some insurance companies) is being transformed by the fusion of
banking and insurance activities under bancassurance. A bancassurance strategy is evident, for
example, in the mergers occurring in Finland and in Spain; the proposed mergers of DeutscheDresdner in Germany (where Allianz was due to play a major role) and the NatWest-Legal &
General in the UK was frustrated. The emergence of bancassurance is related to the most
important dimension of internal restructuring occurring in the sector, namely the revolution in
work organisation and service delivery which certain forms of direct banking and insurance
provision entail.
Another dimension largely involves the internal dynamics of the organisation. This is the
introduction of cross-national divisions, which is a particular feature of companies such as ABN
AMRO and the ING Group in the Netherlands. An integrated company structure, which is seen
as the best way to meet the demands of the coming single European financial market, also has
implications for the development of more common human resource policies and practices across
borders.
In road haulage, mergers and acquisitions are playing an important role in the creation of a small
but growing number of companies operating on a pan-European scale. Cross-border mergers
appear to be relatively more prominent than in banking and insurance. As in the automotive
sector, but unlike banking and finance, major companies headquartered outside of Europe, of
which DHL and TNT are numbered amongst our case studies, are playing an important part in
this process. So too is the recently privatised Deutsche Post. These new European-wide
consolidations tend to operate in two segments of the market – express delivery and/or logistics.
The potential for further restructuring has probably also been increased. The abolition of customs
checks and cabotage requirements accompanying the implementation of the single European
market has opened up national markets to competition from hauliers based not only in other EU
countries, but in central and southeastern Europe as well. The viability of many of the small
operators that still dominate the sector may well be called into question in the face of such
intensified competition coupled with growing demands from international customers for a panEuropean service. Further growth in franchising and other networking arrangements can also be
expected.
The principal internal form of restructuring underway is the growth of logistics, integrating
warehousing and transit with traditional distribution. The demand from major industrial and
retail customers for a complete logistics service resembles that facing automotive components
suppliers to supply complete systems rather than individual components.
Direct effects of the introduction of the single currency have been most keenly felt in the banking
part of the finance sector. Introduction of Target, which links the different national payments
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systems to the ECB’s payment system, requires banks to be open for trading between 7.00 a.m.
and 18.00 p.m. on all but two days of the year. This has widespread implications for working
hours and existing bank holidays in banks across the euro-zone, but also, because of the extent of
its integration within the single European market, in the UK. A further direct effect is that the
activities of, and employment in, foreign currency departments of banks in the five countries that
are part of the euro-zone have been scaled down. Beyond this, the introduction of the euro affects
virtually every product offered by banks and insurance companies as well as their core financial
operations. The industrial relations impact of these substantial organisational challenges is
reflected in extensive training activity for staff throughout the sector.
In the automotive and road haulage sectors, direct effects of EMU in its narrow sense are less
evident. The principal impact in the automotive sector to date would appear to flow from the
impact of the greater transparency afforded by the euro on supply prices. Indeed, in switching
over to the single currency priority was being given by our automotive manufacturing case study
companies to external relationships (suppliers and customers). Already, greater transparency of
supply prices was seen to be giving manufacturers the ability to bear down harder on costs and to
reduce the number of suppliers across the single market with which they deal. Looking to the
future, intensified pressure on manufacturers’ costs was expected from the coupling of price
transparency in final markets with European Commission moves to implement competition
policy more effectively.
In road haulage, all the companies, including the small ones, had introduced arrangements for
the payment of invoices in euros, which had also required some training of the employees
involved. In most cases, customers had the option of paying in the existing national currencies or
the euro. So far, however, only one company, Van Gend & Loos in the Netherlands, could be said
to be a ‘full’ euro company. In other words, not only are internal accounting and internal
budgeting carried out in euros but also customers are charged the same euro tariff for services,
irrespective of the different national composition of costs.
In the five countries that are part of the euro-zone, the extent to which the implications for the
payment of wages and salaries have been acknowledged and addressed varied, although as much
within as between sectors. The provision of parallel wage and salary information in euros on
wage slips was practised in the majority of cases, but is by no means universal. This was done,
for example, in only one of the three financial institutions studied in the Netherlands. Where
information in euros is provided it is more likely to be for the total wage or salary, than for the
component elements or pay. With one exception, namely that of metalworking in Germany, the
issue of rounding of wages and salaries on conversion had not yet been addressed in collective
discussions between the parties. This was despite the fact that management respondents in
several case studies recognised the potential costs involved.
More generally, the role of human resource managers, and of employee representatives, in
projects to introduce the euro varied considerably across the three sectors. As in banking, the
main area of human resource management involvement in the automotive sector was in staff
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training activities, but also in some cases in communication programmes for staff. However, as
noted by our Dutch correspondent, the main trend across all three sectors is for the introduction
of the euro to be regarded as a technical rather than an industrial relations matter. Thus, in the
automotive and finance sectors, where structures of employee representation were widespread
amongst our case studies, trade union and works council representatives had by and large not
been consulted about implementation of the euro, and the training and communication initiatives
accompanying it. There is one important exception, which is Germany, where in the automotive
sector, at least, works councils have played an active role in programmes implementing the single
currency.
As described in Chapter 2, there are substantial differences in the nature and extent of any
European-level framework for industrial relations in the three sectors, together with the extent to
which industrial relations arrangements are decentralised to the company level or below. Road
transport is the only one of the three sectors in which there is a formal social dialogue at EUsector level, although the arrangements cover passenger transport as well. Bargaining at sectorlevel remains entrenched in all countries except the UK, in some instances at regional or
provincial level and in others at national level. Yet there is little evidence of any European-level
initiative aimed at the exchange of information between negotiators in the different countries or
the coordination of bargaining objectives across borders. In contrast, in metalworking, where
sector-level bargaining remains important in France, Finland, Germany and the Netherlands, the
European Metalworkers’ Federation’s bargaining coordination initiative described in Chapter 2
has been reflected in tangible developments on the ground, especially in Germany and the
Netherlands (together with Belgium). In financial services, sectoral-level agreements continue to
be prevalent for both the banking and insurance parts of the sector in all countries except the UK.
Here EURO-FIET’s bargaining cooperation initiative has yet to be reflected in practical steps in
any of the countries surveyed.
The incidence of European Works Councils varies across the three sectors, reflecting not only the
degree of internationalisation of the companies concerned but also the extent to which there is
company bargaining. Comparing the three sectors, bargaining at the company level (either
national or local) is most developed in automotive and least in road haulage. EWCs were, of
course, not found amongst the smaller, national companies. They are most widespread in the
automotive sector, where all the major manufacturers have established arrangements. This
reflects not only the degree of international integration in these multinational companies, but
probably also the extent to which there are decentralised negotiations at national and local
company levels. Company negotiations, either within the framework of a sectoral agreement or –
as in Spain and the UK on a free-standing basis – are the norm. This equally applies to
automotive components, but here EWC arrangements have only very recently been, or are in the
process of being, established. This may be on account of the fact that production operations are
typically less internationally integrated than in motor manufacture.
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EWCs are also widespread in the finance sector, although again Finland is an exception. Like the
automotive components sector, they tend to be of more recent origin than motor manufacturing.
Again, also, there is a company-level dimension to collective bargaining in most of the countries
studied although it is less extensive than in the automotive sector, of more recent origin and more
variable as between countries and companies. There is nothing like the tradition of workplace
industrial relations activity and trade union organisation found in the automotive sector. This last
remark equally applies to road haulage, where EWCs are being established in the larger
international companies. Their relative overall scarcity across the sector is related not only to the
fragmented structure of the industry but probably also to the fact that of the three sectors,
company-level negotiations are least common in road haulage.
Changing balance between sectoral and company levels
The balance between sectoral and company levels is a live issue in both the automotive and
finances sectors in several countries. In the road haulage sector interest in developing scope for
company-level bargaining is confined to the relatively small number of international companies.
Obviously in the UK, where sectoral-level bargaining arrangements came to end in engineering
and banking a decade or more ago, the issue of balance has been resolved decisively in favour of
company-level bargaining arrangements (or, in some parts of automotive components and
banking and insurance, non-union arrangements at company level). The company-level also
appears to be firmly entrenched as the sole level of bargaining in the automotive sector in Spain.
Elsewhere, where sectoral-level agreements remain in place, none of our respondents viewed it
as either desirable or likely that they would disappear. Indeed, in Spain collective bargaining at
sectoral level has gained importance in insurance over recent years as the result of developments
in company agreements in some of the larger companies. Respondents in financial services and
road haulage said placing constraints on inter-firm competition in labour costs and labour
conditions within national boundaries, in particular, would remain a persuasive rationale for
comprehensive sectoral agreements. Instead, the nature of sectoral-level agreements has been
changing away from enumerating detailed provisions and toward establishing core pay and
conditions and guiding principles for subsequent negotiations at lower levels. This was more so
in the automotive and banking and insurance sectors than in the road haulage sectors. Many
management respondents wished to see these developments go further. Detailed sectoral-level
agreements cannot provide companies with the flexibility they require in the face of rapidly
changing market circumstances, nor can they address the particular and different requirements of
large, multi-business, international companies.
In the automotive sector, the scope under sectoral agreements for negotiations at company-level
over working time arrangements and working practices, in particular, has been progressively
widened in Finland, France, Germany and the Netherlands. There appears to be a noticeable
trend also towards the development of company bargaining over working time and working
practices in the finance sector. In the Netherlands, in particular, the large banks have concluded
supplementary company agreements in recent years. The incentive to do so is all the more where
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companies are developing across the traditional boundaries of the different sub-sectors of
financial services, and where, as in Finland, Germany and the Netherlands, there are separate
sectoral agreements for banking and insurance. But in banking and finance the development of
company-level bargaining has so far not tended to extend to the large number of medium-sized
institutions, an observation which applies even more forcefully in road transport where, as noted
above, company-level bargaining is confined to a few large international companies.
Taken together, these developments suggest that the future of sectoral-level bargaining in all
three sectors lies in one of two directions. Under the first, the sectoral agreement becomes a
framework agreement rather than a standard agreement, while also continuing to be a vehicle for
implementing national incomes policy agreements in countries such as Finland. Under the
second, a two-tier arrangement develops: the sectoral agreement primarily deals with the
situation of the SMEs, while the larger companies introduce their own agreements that may or
may not build on the sectoral agreements.
Bargaining coordination at sectoral level
There was widespread consensus amongst respondents in the automotive and finance sectors that
collective bargaining arrangements at the EU-sector level which mirror the national and regional
level structures found in five of the six countries is a distant prospect. Crucially, employers’
organisations are opposed to any such development. Instead, the development of forms of
bargaining coordination appeared more likely. In road haulage, however, some employer and
trade union respondents foresaw the possibility of a European-level sectoral agreement.
Forms of bargaining cooperation and coordination are developing as a result of trade union
initiatives from the relevant European Industry Federation at European-level and/or on a bilateral
and multilateral basis in the case of individual trade unions in the different countries. This is
above all the case in the automotive sector, which is covered by the EMF’s bargaining
coordination initiative and also by IG-Metall’s complementary initiative to establish regional
bargaining cooperation networks with its partner unions in countries and regions that neighbour
its bargaining districts. The best developed cooperation involves IG-Metall in North-Rhine
Westphalia, a district in which the automotive sector does not have a strong presence, together
with Belgian and Dutch metalworking trade unions organising in the automotive sector. More
embryonic developments, such as the exchange of bargaining information and joint seminars,
involving the Lower Saxony district of IG-Metall (home to VW) and the British AEEU, were also
reported by our correspondents.
On the employers’ side, bargaining cooperation between metalworking unions in North-Rhine
Westphalia, Belgium and the Netherlands appears to have developed to the point where the
respective employers’ associations have developed a regional cooperation arrangement for
exchange of data on wages, labour costs and productivity on a regular basis. Thus, in what may
prove to be a proto-typical development within the sector, ‘arms-length’ cross-border bargaining
is developing in which the positions of both employers and trade unions across the three
regions/countries are increasingly coordinated even though there is no cross-border bargaining
unit.
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In the finance sector, trade unions from the different countries aspire to set in train a similar
process of bargaining cooperation and coordination through UNI-Europa. In banking, the aim is
to draw up European-level recommendations that can be incorporated into the bargaining agenda
in national negotiations. Systematic exchange of information on the terms and conditions
specif ied in national agreements is also proposed, with the intention of facilitating a
benchmarking process across borders. To date, however, there is little sign on the ground of the
practical steps that are emerging in the metalworking sector towards making the aspiration of
bargaining coordination a reality. Moreover, there is no indication that employers’ organisations
in the different countries are having to respond to any coordination pressures coming from the
trade union side.
A second kind of development appears possible in the road haulage sector, where as noted earlier
there is no evidence of any trade union initiatives aimed at bargaining cooperation. Instead, a
number of respondents expressed doubts about the ability of existing national and regional sector
bargaining arrangements to remain viable in the face of increasing cross-border competition not
only from within the EU but also from southeastern European countries currently outside the EU.
With the scope of competition no longer nationally delimited, an EU-sector agreement laying
down minimum standards might be the only way of putting a floor under competition in wages
and working conditions. Here the experience already acquired by the social partners in
addressing issues of safety and working time through dialogue in the European sector makes
such a development appear less of a leap from existing arrangements.
The ‘Europeanisation’ of company negotiations
At company level, a more implicit European dimension to collective bargaining is widespread in
the local plant- and company-level negotiations over working practices, working time
arrangements and company-specific pay within the internationally integrated manufacturers in
the automotive sector. This implicit dimension derives from management’s use in local and
national company negotiations of coercive comparisons of labour costs and labour performance
across plants located in different countries within the same multinational company. The use of
such comparisons in company negotiations was widespread before implementation of EMU, and
is increasingly reaching beyond Europe to company plants across the globe. Such cross-country
comparisons of costs and performance are increasingly evident, if not as intensive, in the
components element of the sector. Their deployment in negotiations with local workforces is
aimed at securing changes in working practices and working time arrangements in return for
future management commitments on investment and production for the plant concerned. The
process involved amounts to a form of cross-border concession bargaining, which is resulting in
a convergence of practice across countries within given multinational producers.
The use of cross-country comparisons by trade unions and works councils in company-level
negotiations appears to be less well developed than on the management side. Although in
automotive manufacturing, as distinct from components supply, there was evidence of this
developing, management is clearly the driving force behind this Europeanisation of bargaining
practice and bargaining outcomes.
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In contrast, the use by the finance sector management of such coercive comparisons in local and
national company negotiations is effectively absent. Put simply, there is nothing like the level of
homogenisation of the automotive manufacturers’ products or the integrated production
arrangements that accompany them. Much the same observation applies to the road haulage
sector. For their part, employee representatives in the two sectors do not have the tradition of
workplace organisation that is found in the automotive sector, which provides the platform from
which a coordinated cross-border response to management might be developed. Of course,
European Works Councils potentially provide employee representatives to do just this.
European Works Councils
As yet, active and effective EWC arrangements appear to be largely confined to the automotive
sector. There are only a few indications that employee representatives are utilising EWCs for a
systematic exchange of information on matters relevant to company-level negotiations.
Moreover, all those instances that were cited were in automotive manufacturing, for example at
General Motors and Nedcar where EWCs are longer established, were frequently preceded by
trade union sponsored contacts between local representatives, in situations where employee
representatives have greater negotiating experience. Conversely, too, management in the
automotive sector was more likely to view EWCs as being an important vehicle for legitimising
strategic business decisions affecting employees’ interests in several countries.
In the finance and road haulage sectors, EWCs are not only more recently established, but also
represent the first opportunity that employee representatives have had to meet and discuss issues
with one another. In these two sectors, both management and trade union representatives tended
to highlight the difficulties involved in developing an effective forum. In Germany and the
Netherlands, in particular, demarcating the role of the EWC from that of influential central works
councils in the major banks, accustomed to receiving information and being consulted over
business strategy beyond the confines of the national territory concerned, was mentioned.
Nonetheless, an indication of the potential that EWCs offer for the development of common
European guidelines or framework policies on aspects of employment practice was evident at
ABN AMRO and the ING Group. Here issues such as employability, training and equal
opportunities have been put on the agenda with a view to implementing common positions
through the national negotiations in different countries. Similarly, at VW, both management and
employee representatives saw pension provision as a suitable issue for the EWC to deliberate on
and potentially conclude some kind of framework agreement.
Even so, neither management nor trade union representatives expected European-company-level
bargaining over pay and major conditions to develop through EWCs. This was even true where
bargaining is already solely company-based, as in the automotive sector in Spain and the UK and
in the finance sector in the UK.
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Both employer and trade union representatives in each of the six countries saw the impact of
EMU on pay and employment as being largely indirect in the three sectors. On working time,
however, introduction of the single currency is having a direct effect on hours and holiday
arrangements in banking.
Pay
Trends in wages and salaries in each of the three sectors were seen as continuing to be shaped
mainly by national considerations. These, however, included the stabilisation policies adopted by
national governments and the social pacts concluded between some national governments and the
social partners in order to comply with the convergence criteria for EMU, as is the case in
Finland. Moreover, as a common monetary policy is bringing convergence of inflation rates
within the euro-zone, the influence of EMU on the cost-of-living dimension of wage
developments will become an enduring feature of pay settlements in the five countries within this
zone.
Beyond this, both employer and trade union representatives almost universally saw common pay
outcomes in terms of wage levels as being a long way off. In road haulage there was some
sensitivity on the part of management to the consequences of the increased transparency brought
by the euro to pay, especially in the Netherlands. More generally, payments systems in each of
the sectors differ across countries. Crucially also, take-home pay derives not only from
negotiated wage rates but also from the social insurance charges and taxation. Here, there are
very large differences in taxation and social security systems between EU states. Within the eurozone, wage rates and salaries will become more transparent but there remain formidable
obstacles to any genuine comparison of pay across borders. Only in the event of the EU adopting
a common social security, national insurance and taxation regime did any employer or trade
union representatives consider that common wage outcomes were a possibility.
The only other exceptions cited, apart from senior managers, were likely to be specialist groups
in banking, such as financial traders and investment bankers, for whom an international labour
market stretching across the Atlantic already exists. At the other extreme, one or two of the
internationally integrated automotive manufacturers could foresee pressure for a levelling up of
wages amongst semi-skilled workers from plants in the lowest paid parts of the EU, Portugal for
example.
Working time
The introduction of the single currency is having a direct effect on hours and holiday
arrangements in banking. Otherwise, however, sector-specific considerations are dominant, of
which Economic and Monetary Union is only one among many. In both automotive and finance,
the flexibility of working time has emerged as a major issue. In the automotive sector, changes in
production processes such as teamworking and just-in-time production have combined with the
need to respond to fluctuating volume and customer tastes by seeking variability in the working
day and working week through overtime ‘corridors’, Saturday working and annual hours
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arrangements. In finance, there is pressure for more part-time working and more shift working
both to respond to customer demands for service at peak periods in branches and to have
extended periods of access in the new call-centres.
In road haulage, long hours are the main issue. These have been a feature of the sector for
decades, however, although the coming of the single European market has probably exacerbated
the problem. Here, EU regulation on working time is imminent, in response to the wider
pressures flowing from market integration (in which EMU is a crucial step). It remains to be
seen, however, what impact this has above all in the SMEs that make up the overwhelming
proportion of companies in the sector.
Employment
In automotive manufacturing, the restructuring and reorganisation that are a consequence of
ever-closer European integration were seen to be further exacerbating overcapacity. Significant
reductions in numbers employed over the next few years are anticipated. Their distribution is
likely to be extremely uneven between the major producers, however, reflecting the strength of
the demand for the model range. Competition for future investment is also likely to intensify
even further. Indeed, two main forms of so-called ‘regime competition’ are likely to be in
evidence: competition between existing facilities for new investment, which is likely to have a
significant effect on the conditions of employment; and competition between different labour
market systems, the substantial labour costs differentials between central and eastern European
countries and the European Union being a key consideration.
In finance, EMU has already had a direct impact on employment inasmuch as many currencyrelated activities have been discontinued, with further reductions expected in the number of
national central bank employees. As many of our respondents emphasised, however, EMU is also
expected to create new business opportunities in the sector, making it very difficult to arrive at a
net effect. Moreover, singling out the impact of EMU on employment from the many other
developments taking place in the sector, as a result of new technology and the wave of mergers
and acquisitions, is virtually impossible. One thing is clear. Unlike in the automotive sector, a
considerable re-distribution of employment is taking place, the most notable being that between
the traditional branch and the new call-centres, which may or may not be located in the country
of origin. The corollary is that many employees are developing new specific skills at the expense
of the more general education and training that they used to receive.
In road haulage, an increase in activity is expected as a result of the coming of EMU and the
further development of the single European market, with likely developments in e-commerce
giving an additional boost. In these circumstances, overall growth in employment in the sector is
expected, although this could be uneven reflecting the circumstances of particular business
activities and/or the region in which they take place. Several of our respondents also made the
point that the skills and competences required of employees in the sector were increasing, and
not just at head office either, where a new breed of highly skilled logistics experts was emerging.
The skills and competences required of drivers were also increasing as more and more was
expected of them.
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Chapter 7
The impact of EMU on industrial relations can be considered from two viewpoints. The first,
which might be labelled the narrow view, is to see EMU in terms of the single currency, the
European Central Bank with responsibility for setting a single monetary policy and the Stability
and Growth Pact designed to put teeth into the public deficit provisions. From this position,
EMU appears so far to have had relatively little impact on either the processes or the outcomes of
industrial relations in the three sectors studied. In the case of the processes of industrial relations,
the developments in coordination at EU sector level in both the automotive and finance sectors
by the EMF and UNI Europa respectively are a direct response to EMU, but they have yet to have
a demonstrable impact. The changing balance between sector and company bargaining that is the
major feature of a number of the case study companies in the automotive and finance sectors
(and, to a lesser extent, in road haulage) reflects wider developments in corporate restructuring,
discussed below. In terms of pay and employment, there also appears to be little impact. In the
finance sector, there is a direct impact on the levels and conditions of employment – for example,
in foreign exchange transactions – but the number of employees involved is relatively small.
Overall, pay moderation is the norm, but this has been an enduring feature of the 1990s. The
costs of introducing the single currency are likely to reduce profit margins in each of the sectors,
especially where increasing competition puts pressure on prices, but any knock-on effects on
employment have yet to be experienced.
The second position is to see EMU as the on-going process involved in establishing the single
European market. From this position, the impact on industrial relations looks much more
substantial, albeit indirect. It is the considerable boost that EMU has given to the emergence of
large companies through mergers and takeovers that lies behind the changing balance between
sector and company bargaining in financial services. Similarly, it is EMU which is leading to the
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emergence of pan-European third party (logistics) companies in road haulage in response to the
demands of MNCs for operators to manage their supply chains on a European-wide basis. It is
not just that these mergers and takeovers cut across traditional boundaries of sectoral agreements,
considerably complicating their application, but they also create a need for employment systems
that cannot be fully catered for in multi-employer agreements.
The restructuring that the single market has unleashed also has considerable implications. In the
automotive sector, where increasing globalisation rather than ‘Europeanisation’ might be said to
be the dominant consideration, European integration is intensifying competition, adding to the
pressure to cut costs. In finance, it is one of a number of factors underpinning changes in
working practices and working conditions and helping to bring about considerable shifts in
employment from branches to call-centres. In road haulage, it is not only giving further impetus
to the shift from ‘own account’ to ‘hire and reward’ operators, but is also opening up the sector
to competition from drivers and companies from Bulgaria, Romania and Turkey as well as from
across the EU.
Significant, too, is that these conclusions apply as much to the UK, which has not yet adopted
the euro, as they do to the other countries which have. Indeed, as our report on the UK for the
present project emphasised, there are reasons for expecting EMU-generated pressure for restructuring to be especially strong in the UK. Not only is the UK both home and host to an
exceptionally large number of MNCs, but it is also one of the relatively low pay-low productivity
members of the EU and has the loosest set of arrangements governing mergers and closures.
The impact of these developments on the processes of industrial relations varies from sector to
sector. ‘Regime competition’ is most evident in automotive manufacturing, where cross-national
comparisons of costs and conditions are already an important consideration in negotiations
between management and trade unions as well as in investment decisions. The more management
encourages employees to compete for investment in the company’s internal market, the more
employee representatives have their attention drawn to the terms and conditions of employment
in other countries, the basic working week being the most obvious example.
In finance and road haulage, however, the first shoots of a European system have hardly begun to
appear. In finance, there is nothing like the use of ‘coercive comparisons’ there is in the
automotive sector and the dominant issue is dealing with the implications of restructuring. In
road haulage, there are as yet hardly any signs of cross-national activity at either sectoral or
company level, although the EU-sector social dialogue is stronger, reflecting the European
Commission’s greater involvement in transport matters.
The differences between the three sectors, and between the companies in the sectors, have been
major considerations throughout the report as well as being the focus of the previous chapter.
Many factors lie behind the differences, including ownership, market position, the degree of
trade union organisation and the wider legal, political and social context of individual countries.
Especially important, however, in helping to explain the growing similarities between companies
regardless of the national industrial relations system, is the degree of homogenisation of
96
activities and the accompanying integration of operations for their delivery. Automobile
manufacture is exceptional in this regard, being dominated by a small number of very large
MNCs with increasingly integrated European, and in some cases worldwide, markets and
production operations. An internal market for capital has long been a feature, and the use of
‘coercive comparisons’ integral to its operation.
The f inance sector is also increasingly dominated by large MNCs. Yet most of these
organisations are now involved in a diverse range of activities, including retail, corporate and
investment banking, plus insurance and savings. Moreover, there is nothing like the crossnational integration there is in automotive manufacturing. Most importantly, retail banking,
where most unionised employees are to be found, remains largely a domestic affair, albeit
increasingly influenced by global developments.
In road haulage, both capital and labour are extremely mobile. Conceivably, some logistics
companies in third party distribution that organise themselves on a similar basis to the
automobile manufacturers may emerge. For the moment, however, the dominating feature of the
sector is its fragmentation. Virtually every one of the key variables – size, ownership and
business focus – is represented at its most extreme and developments are far from clear.
Looking at future prospects in the light of the findings, it would seem that the twin processes of
decentralisation and centralisation within national systems look set to continue. In the first case,
it is not just that EMU is likely to encourage further mergers and acquisitions. As the
investigation of the European Foundation for the Improvement of Living and Working
Conditions into so-called ‘pacts for employment and competitiveness’ suggests (Sisson and
Artiles, 2000), it is also likely to encourage a process of internal restructuring as management
comes under pressure to make its working arrangements more competitive. Indeed, this has
already happened in the case of some of the companies in automotive and finance. Also to be
expected, especially in those countries where there is a long-standing tradition, is that there
would be further developments in ‘macro-concertation’. Other things being equal, as one of our
Dutch respondents commented, it might be expected that EMU would force the social partners
and government into one another’s arms.
Given their key role in establishing frameworks of terms and conditions in most EU countries, it
is the future of sectoral agreements that perhaps most demands the attention of national policy
makers. Developments in finance suggest there are two ways forward. The first is to switch the
emphasis of sectoral agreements from setting standards to establishing frameworks. In this case,
the company agreement is effectively supplementary to the sectoral agreement, which is the case
with AXA in insurance in Spain. The other is that the large companies effectively opt out of
sectoral agreements to negotiate their own company agreements. Indeed, both developments can
be seen in the Netherlands.
Clearly much depends on the structure of the sector. Either is feasible where there are a large
numbers of SMEs as well as large companies. The second is hardly feasible, however, where the
larger companies comprise the sector, as was the case in banking in the UK.
97
Our final remarks are reserved for the prospects for the development of European systems of
industrial relations. It is very clear that the great majority of respondents interviewed as part of
this project do not expect collective bargaining involving normative contracts to emerge in the
near future at either EU sector or Euro-company levels. In road haulage, there is support for an
EU sectoral agreement among some employers’ and trade union representatives, reflecting a
background of social dialogue over the European Commission’s programme of deregulation and
its intervention in areas such as safety and working time. In the automotive and finance sectors,
management and their employers’ organisations are opposed. Regardless of their views about its
desirability, however, there is widespread recognition of the immensely practical problems that
have to be overcome if there is to be collective bargaining at the EU sector level. As recent
experience in road transport demonstrates, the definition of the bargaining unit would appear to
be especially critical – the delineation of the sector for social dialogue purposes may not make
sense in collective bargaining terms.
At Euro-company level, European Works Councils, which some commentators expect to provide
the infrastructure for collective bargaining, are only in their infancy and the early signs are that,
in most cases, it will take some time for them to be become a major industrial relations actor.
Significantly, too, it is not just management that is opposed to EWCs assuming a collective
bargaining role. The same is also true of many employee representatives and their trade unons.
As at sector level, there are significant differences in pay systems and pay structures, which the
transparency of a single currency will only partially illuminate. There are also worries among
employee representatives that moves towards harmonisation will involve levelling down as well
as levelling up.
Although it is extremely unlikely that, for the foreseeable future, there will European collective
agreements determining pay and other substantive conditions, further ‘Europeanisation’ of
industrial relations is nonetheless to be expected, reflecting the development of the single
European market. The process involved might best be described as one of ‘virtual’ collective
bargaining (see Marginson and Sisson, 1998). In other words, collective bargaining will continue
to take place through existing sector and company structures in individual countries but is likely
to be increasingly influenced by cross-national developments. One of these developments will be
the conclusion of ‘joint opinions’ or ‘framework agreements’ at EU interprofessional, EU sector
and Euro-company levels establishing parameters and objectives within which negotiators at
subsidiary levels in individual countries are expected or required to operate. Arguably, the very
first signs of ‘framework agreements’ at Euro-company level are emerging in the finance sector
at AXA, ABN AMRO and the ING Group in the form of agreements on common values. The
other, to use a phrase coined by Batstone (1978), is ‘arms-length’ bargaining, in which employers
and union representatives do not negotiate face-to-face at European level, but the outcomes are
influenced and coordinated across countries. Some features of ‘arms-length’ bargaining are
already apparent in the automotive sector in companies such as General Motors and Peugeot as
well as at the sectoral level in some regions of metalworking.
98
A further implication is that, in the absence of external intervention, the speed with which
‘framework agreements’ and ‘arms-length’ bargaining develop is likely to vary considerably. The
critical dimensions, however, are unlikely to be the national industrial relations system or the
sector as it is traditionally conceived. Rather the main considerations, affecting both the balance
between ‘framework agreements’ and ‘arms-length’ bargaining, along with the levels at which
they take place, will be the specific position of individual companies. Here ownership, market,
geographical spread, organisation structure and the ability of employee representatives to mount
their own variant of ‘coercive comparisons’ are likely to be especially important. In some
subsectors of road haulage, for example, both management and trade unions may see a logic in
multi-employer ‘framework agreements’ on a European basis. Elsewhere, however, notably in
automobile manufacturing and banking, there is unlikely to be a consensus for such
arrangements. Here it is to be expected that the company will be the main focus of activity, with
the balance between ‘framework agreements’ and ‘arms-length’ bargaining differing from case to
case, depending above all on the degree of integration of the company’s activities and
geographical spread. For example, it might be expected that such developments would come
sooner in companies heavily involved in the Benelux-German or Nordic axes than those whose
activities are more widespread. Policy makers, it seems, should expect to have to grapple with a
multispeed Europe so far as the ‘Europeanisation’ of industrial relations is concerned.
Our final remarks take the form of a note of caution. The findings and thoughts presented here
reflect the state of play in our three sectors in late 1999-early 2000 when the research was being
carried out and this report written up. The great imponderable is the impact that the changeover
to the euro in 2002 will have. Much of what has been described and said here is likely to hold
true. In particular, there will still be considerable difficulties in comparing both the levels and the
composition of pay from one country to another. At the same time, however, there is evidence
from research at company level suggesting that new sources of information about pay and the
conditions of employment can have a significant effect on employees’ comparative reference
groups, leading to pressure for changes in bargaining arrangements. This is not to say that the
same will happen with the introduction of the euro. The possibility that it may do so, however, is
something that has to be borne in mind.
99
Annex
Social implications of EMU: guidelines for
national reports
Part One: schedule for interviews at sectoral level
1. Economic and industrial relations context
Note: some of the information specified in this section may be obtained from documentation
rather than through interviews.
Basic information will be required about the following:
•
relative importance of the sector in the economy in terms of output and employment
•
recent trends in output and employment, and the anticipated impact of EMU on these
•
structure of the sector in terms of the balance between small and large enterprises
•
extent to which the sector is internationalised in terms of trading activity (exports and
imports of semi-finished goods and components)
•
extent to which the sector is internationalised in terms of the presence of home- and
overseas-based multinational companies, and trends in the internationalisation of corporate
activity
•
structure of industrial relations in the sector, including employersí association(s), main trade
union(s) organising in the sector, the structure of collective bargaining, and the nature of
enterprise-based employee representation
•
the relationship between sector- and enterprise-level industrial relations arrangements, and
the relative importance of each
101
•
recent trends and developments in industrial relations arrangements at sectoral level,
including the nature and extent of any decentralisation towards the enterprise level
•
the nature and extent of communications, consultation and collective bargaining at sectoral
level (to date and envisaged) over the implementation of the euro
2. The implications for the processes of industrial relations
More ‘Europeanisation’ of industrial relations?
There is already evidence that sectoral negotiations within the ‘Deutschmark zone’ are taking
account of wage settlements by their counterparts in neighbouring countries. Also, the recent
reform of bargaining arrangements in Belgium establishes a new central structure linking the
outcome of sectoral wage negotiations to wage movements in its main trading partners. Most
relevant to the current investigation, in March 1998 Euro-FIET adopted a strategy paper
emphasising the need for European level coordination of collective bargaining in banking and
finance, while in December 1998 the EMF adopted a so-called ‘European Coordination Rule for
national bargaining in metalworking’.
Questions should therefore cover:
•
the use by trade union representatives of comparisons of pay, working time and other
conditions across EU countries
•
any arrangements for coordination, meetings or informal contacts between trade union
representatives across EU countries
•
the use by employers’ organisation representatives of comparisons of labour performance,
productivity, unit labour costs and/or working practices across EU countries
•
any arrangements for coordination, meetings or informal contacts between employers’
organisation representatives across EU countries
•
any indications, formally or informally, that the contents of sectoral agreements are being
influenced by movements in economic indicators and/or the terms of sectoral agreements in
other countries
•
any indications, formally or informally, that the contents of sectoral agreements are
shadowing or following the terms of sectoral agreements in other countries
•
any indications formally or informally that the contents of sectoral agreements are being
influenced by the arrangements for coordination
•
the role in, and the impact on, these processes of EU sector organisations of trade unions
and/or employers and any EU sector level social dialogue
•
views on the likelihood of the greater use of cross-national comparisons and coordination
and whether this will lead to collective bargaining at EU sector level and the circumstances
under which this might happen
102
National industrial relations systems and the challenge of ’regime competition’
There is a widespread consensus that the powerful forces leading management, above all of
multinational companies, to seek to decentralise collective bargaining will continue because of
the implications of restructuring touched on below. The key question is how far decentralisation
will go. One view is that it could result in the break-up of the dominant structures of multiemployer collective bargaining and eventually lead to the so-called ‘Americanisation’ of
European industrial relations in which collective bargaining, where it survives, is primarily based
on the individual enterprise.
Another view is that reform rather than abolition seems to be the main objective, for example the
use of so-called ‘opening clauses’ (Öffnungsklauseln) in Germany allowing companies to deviate
from the sectoral collective agreements within a certain range. A third view is that there could be
a varying reaction between countries depending on the circumstances of MNCs. In the event of
some form of wage leadership developing under EMU, there may be a strong incentive for MNCs
in the wage-setting country to stick with the national system of multi-employer bargaining as a
means of influencing the overall level of settlements. In countries which are ‘wage followers’,
however, the management of MNCs may decide that the national system no longer serves a
useful purpose.
•
views of the respondents on the impact of increasing European economic integration, and in
particular EMU, on national systems of collective bargaining
•
views about the future role of sectoral agreements
•
views about likely developments in the balance between sectoral and company agreements
•
views on the advantages and disadvantages of these developments
3. The implications for pay and employment
There would seem to be a consensus that, in the light of Economic and Monetary Union,
‘generalised moderation’ has been the prevailing trend of wage developments in most countries.
There has been more controversy over the issue of wage convergence between employees doing
identical or near-identical jobs in different EU member countries. For example, in an article
entitled ‘EMU – will it lead to a European wage?’ in the first issue of EMU: The Journal for
Business (launched in 1998), its author – a pay specialist – is quite sceptical suggesting that, on
balance, the divergent pressures are likely to outweigh the convergent.
employment is in unravelling the macro and the micro effects. There has, nonetheless, been an
place. Many commentators are expecting EMU to accelerate the direction of investment, and
hence employment, towards the most cost efficient regions and countries. Some argue that this
will benefit the lower cost and less heavily regulated ‘periphery’ of the EU at the expense of the
higher cost, more heavily regulated ‘core’.
103
Others, who tend to the divergence view, argue against this. In the low-wage sectors of low-wage
countries, they argue, the ‘newly-exposed’ industries are indeed likely to attract investment from
higher-wage countries because of their potential for expansion. In the high-wage sectors,
however, wages are a smaller part of total costs, and there is less incentive to switch investment
to low-wage countries. Indeed, there is the possibility that high-wage countries, rather than the
periphery, will benefit because of the superiority of their infrastructure, skills and training. A
variant of this second view is that it will be regions of Europe, rather than individual countries,
that will be the key variable in these decisions
Questions should therefore cover the views of the respondents on the impact of growing
European economic integration, and EMU in particular, on the following:
•
developments in wage levels in the sector – in particular on the main guiding principles and
the outcome of the pressures for wage convergence/divergence
•
developments in the trend of wages in the sector – in particular on the main guiding
principles, and on the relationship between productivity changes, wage trends and pressures
for wage convergence/divergence
•
developments in payments systems in the sector – in particular the spread of performancebased systems
•
employment developments in the sector, the quantitative dimension – in particular the key
factors governing investment and its likely direction
•
the qualitative dimension of employment developments in the sector, including the
implications of the increased competition deriving from greater economic integration for
training and skill requirements
•
potential changes in employment and working practices as a result of intensified competitive
pressures resulting from greater economic integration including trends in the use of
contingent or atypical forms of employment and changes to working time arrangements
•
the relationship between wages and employment in the sector – in particular on the extent of
any trade-off between the two, skill development and changes in working and employment
practices
4. Wider considerations
A recurring theme in the debate on the impact of EMU is that a single capital market, driven by
global stock market considerations, will accelerate restructuring and bring about changes in the
dominant model of business organisation. Signif icantly, it is argued that the so-called
‘Rhineland’ model of corporate governance, in which social considerations vie with economic
ones, and the ‘Corbertist’ model, under which the state gives strategic direction and resources to
enterprises, will give way to the ‘Anglo-Saxon’ model, in which shareholder value predominates.
Whilst the emergence of a single capital market, as well as a single product market, is widely
seen to be a significant result of EMU, commentators largely agree that a single European labour
market appears to be an unlikely prospect in the immediate future.
104
Questions might therefore cover the views of the respondents on the impact of growing European
economic integration, and EMU in particular, on the following:
•
the nature and extent of restructuring within the sector that they envisage
•
trends and developments in the dominant forms of business organisation in the sector that
they envisage
•
the extent to which respondents see the above developments as stemming from the particular
dynamics of growing economic integration within Europe, or as part of a wider process of
internationalisation
•
the potential for the development of a single European labour market, and for which groups
within the workforce this might be more likely
•
the advantages and disadvantages of these possible developments
•
any other views and opinions the respondents might have about the human
relations/industrial relations impact of EMU
Part Two: schedule for interviews at company level
1. Economic and industrial relations context
Note: some of the information specified in this section may be obtained from documentation
rather than through interviews.
Basic information will be required about the following:
•
the company and its portfolio of activities
•
the spread of its workforce between the ‘country of origin’ and other countries; between EU
and non-EU countries; between EMU and non-EMU countries
•
its organisation structure (including the balance between national companies and
international divisions; the relationship between headquarters and national companies and/or
international divisions; and, where possible, the nature and extent of the main control
systems)
•
the role and composition of the human relations function
•
employee representation at local and (national) group level, i.e. balance between trade union
and/or works council
•
employee representation at Euro-company level, including any European Works Council
(EWC)
•
the employers’ organisation and trade unions at national sector level
•
the employers’ organisation and trade unions at EU sector level
105
2. The practicalities
Most attention has focused on the wider implications of EMU for the processes and outcomes of
industrial relations (see below). Yet the practical issues that EMU raises are likely to be of
considerable importance and include:
Effects on operations. Companies may have already introduced the euro for general accounting
and financial management purposes or have changed labelling (for example, to set new price
breaks in euros, etc.). There may also be industry-specific issues, especially in banking and
finance.
Training. Companies presumably need to train staff involved in handling the new currency, above
all those working in accounts, treasury and IT operations.
The payment of wages. Companies have to make plans for the move to the payment of wages in
euros, including, for example, decisions about any dual display of amounts on wage slips during
the transitional period and about rounding-up or down.
Effects on pensions. In the case of some occupational pension schemes, there may be
implications for the balance of investment decisions between EMU and non-EMU countries
•
views on the areas of business most likely to be affected by introduction of the euro
•
whether there is an action plan for the implementation of the euro, the steps being taken to
implement it and whether the action plan provides for a budget
•
whether there is any estimate of the costs involved in adapting to the euro
•
whether the action plan provides for communication and training
•
the role of the human resources department in the implementation of the euro
•
the nature and extent of communications, consultation and collective bargaining with
employee representatives (to date and envisaged) over the implementation of the euro within
the enterprise (at both workplace and higher levels)
3. The implications for the processes of industrial relations
More ‘Europeanisation’ of industrial relations?
A common theme is that the greater transparency of wages and costs under EMU will encourage
greater cross-national comparability. Most attention has focused on employee expectations in
multinational companies because of the infrastructure of European Works Councils. The
expectation is that, whatever else EWCs do, they will be an important vehicle for the exchange of
information between employee representatives – ‘networking at management’s expense’ as one
personnel director has put it. Also reckoned to be important will be the comparisons of costs and
productivity performance that the management of MNCs will be making. Indeed, such
106
comparisons are likely to be intrinsic to management investment decisions, regardless of any
pressure from employees for wage comparability, because of the greater element of competition
that EMU is expected to bring.
•
the use by employee representatives of comparisons of pay, working time and other
conditions across the company’s operations in different EMU, and non-EMU, countries
•
any arrangements for coordination, meetings or informal contacts between employee
representatives across the company’s operations in different EMU, and non-EMU, countries
•
the use by management of comparisons of labour performance, productivity, unit labour
costs and/or working practices across the company’s operations in different EU countries
•
any arrangements for coordination, meetings or informal contacts between managers across
the company’s operations in different EU countries
•
any indications, formally or informally, that company agreements are being influenced/are
following the terms of agreements elsewhere in the company’s operations in different EU
countries
•
any indications formally or informally that the contents of sectoral agreements are being
influenced by the arrangements for coordination
•
the role of any European Works Council, formally and informally, in these processes
•
views on the likelihood of the greater use of cross-national comparisons and coordination
between the company’s operations in different EU member countries and whether this will
lead to Euro-company bargaining, the issues which might be involved and the circumstances
under which this might happen
National industrial relations systems and the challenge of ‘regime competition’
There is a widespread consensus that the powerful forces leading management, above all of
multinational companies, to seek to decentralise collective bargaining will continue because of
the implications of restructuring touched on below. The key question is how far decentralisation
will go. One view is that it could result in the break-up of the dominant structures of multiemployer collective bargaining and eventually lead to the so-called ‘Americanisation’ of
European industrial relations in which collective bargaining, where it survives, is primarily based
on the individual enterprise.
Another view is that reform rather than abolition seems to be the main objective, for example,
the use of so-called ‘opening clauses’ (Öffnungsklauseln) in Germany allowing companies to
deviate from the sectoral collective agreements within a certain range. A third view is that there
could be a differential reaction between countries depending on the circumstances of MNCs. In
the event of some form of wage leadership developing under EMU, there may be a strong
incentive for MNCs in the wage-setting country to stick with the national system of multi-
107
employer bargaining as a means of influencing the overall level of settlements. In countries,
which are ‘wage followers’, however, the management of MNCs may decide that the national
system no longer serves a useful purpose.
•
views of respondents on the impact of increasing European economic integration, and
particular EMU, on national systems of collective bargaining
•
views about the future role of sectoral agreements
•
views about the likely developments in the balance between sectoral and enterprise
agreements
•
views on the advantages and disadvantages of these developments
4. The implications for pay and employment
There would seem to be a consensus that, in the light of Economic and Monetary Union,
‘generalised moderation’ has been the prevailing trend of wage developments in most countries.
There has been more controversy over the issue of wage convergence between employees doing
identical or near-identical jobs in different EU member countries. For example, in an article
entitled ‘EMU – will it lead to a European wage?’ in the first issue of EMU: The Journal for
Business (launched in 1998), its author – a pay specialist – is quite sceptical suggesting that, on
balance, the divergent pressures are likely to outweigh the convergent.
employment is in unravelling the macro and the micro effects. There has, nonetheless, been an
place. Many commentators are expecting EMU to accelerate the direction of investment, and
hence employment, towards the most cost-efficient regions and countries. Some argue that this
will benefit the lower cost and less heavily regulated ‘periphery’ of the EU at the expense of the
higher cost, more heavily regulated ‘core’.
Others, who tend to the divergence view, argue against this. In the low-wage sectors of low-wage
countries, they argue, the ‘newly-exposed’ industries are indeed likely to attract investment from
higher-wage countries because of their potential for expansion. In the high-wage sectors,
however, wages are a smaller part of total costs, and there is less incentive to switch investment
to low-wage countries. Indeed, there is the possibility that high-wage countries, rather than the
periphery, will benefit because of the superiority of their infrastructure, skills and training. A
variant of this second view is that it will be regions of Europe, rather than individual countries,
that will be the key variable in these decisions.
Questions should therefore cover the views of the respondents on the impact of growing
European economic integration, and EMU in particular, on the following:
108
•
developments in wage levels in their company – in particular on the main guiding principles
and the outcome of the pressures for wage convergence/divergence
•
developments in the trend of wages in their company – in particular on the main guiding
principles, and on the relationship between productivity changes, wage trends and pressures
for wage convergence/divergence
•
developments in payments systems in their company – in particular the use of performancebased systems
•
employment developments in their company, the quantitative dimension – in particular the
key factors governing investment and its likely direction
•
the qualitative dimension of employment developments in their company, including the
implications of the increased competition deriving from greater economic integration for
training and skill requirements
•
potential changes in employment and working practices as a result of intensified competitive
pressures resulting from greater economic integration including trends in the use of
contingent or atypical forms of employment and changes to working time arrangements
•
the relationship between wages and employment in the company – in particular on the extent
of any trade-off between the two, skill development and changes in working and employment
practices
5. Wider considerations
A recurring theme in the debate over the impact of EMU is that a single capital market, driven by
global stock market considerations, will accelerate restructuring and bring about changes in the
dominant model of business organisation. Signif icantly, it is argued that the so-called
‘Rhineland’ model of corporate governance, in which social considerations vie with economic
ones, and the ‘Corbertist’ model, under which the state gives strategic direction and resources to
enterprises, will give way to the ‘Anglo-Saxon’ model, in which shareholder value predominates.
Whilst the emergence of a single capital market, as well as a single product market, is widely
seen to be a significant result of EMU, commentators largely agree that a single European labour
market appears to be an unlikely prospect in the immediate future.
Questions might therefore cover the views of the respondents on the impact of growing European
economic integration, and EMU in particular, on the following:
•
the nature and extent of restructuring amongst companies in their sector that they envisage
•
trends and developments in the dominant forms of business organisation amongst companies
in their sector that they envisage
•
the extent to which respondents see the above developments as stemming from the particular
dynamics of growing economic integration within Europe, or as part of a wider process of
internationalisation
109
•
the potential for the development of a single European labour market, and for which groups
within the workforce this might be more likely
•
the advantages and disadvantages of these possible developments
•
any other views and opinions the respondents might have about the human relations/
industrial relations impact of EMU.
110
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114
European Foundation for the Improvement of Living and Working Conditions
The Impact of Economic and Monetary Union on Industrial Relations: A Sectoral and Company View
Luxembourg: Office for Official Publications of the European Communities
2000 – 114 pp. – 21 x 29.7 cm
ISBN 92-897-0011-4
EF/00/46/EN
The introduction of Economic and Monetary Union is one of the defining moments in the
development of European integration. Up to now, most of the attention has focused on the
economic and financial aspects of EMU. By contrast, the social implications of such a crucial
development have received little attention. However, it is undeniable that the impact of EMU
on the employment, pay and working conditions will have far-reaching consequences on the
lives of all European citizens.
This report looks at to what extent the face of European industrial relations is being changed by
EMU. Drawing on detailed investigations in three sectors – automotive, finance and road
haulage – it sets out to analyse the effects on the processes and outcomes, especially in terms of
collective bargaining, employment, restructuring and investment, both at sectoral and company
level. It examines the practicalities involved in introducing the euro and asks whether the
coming of EMU has led to increasing ‘Europeanisation’ of industrial relations.
OFFICE FOR OFFICIAL PUBLICATIONS OF
THE EUROPEAN COMMUNITIES
L-2985 Luxembourg
The Impact of Economic and Monetary Union on Industrial Relations – A Sectoral and Company View
14 5 4 TJ-31-00-748-EN-C
EUROPEAN FOUNDATION

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