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Electronic copy available at: http://ssrn.com/abstract=2454669
Electronic copy available at: http://ssrn.com/abstract=2454669
The politics of flexibility: Employment practices in automotive
multinationals in Central and Eastern Europe
Jan Drahokoupil European Trade Union Institute, Brussels,
Belgium and Universitt Mannheim,Germany
Martin Myant European Trade Union Institute, Brussels,
Belgium
Stefan Domonkos Universitt Mannheim, Germany
Corresponding author:Jan Drahokoupil, ETUI, Boulevard du Roi
Albert II, 5, 1210 Brussels, Belgium.Email:
[email protected]
Abstract
In this article we investigate the flexibility strategies of
foreign automobile producers in three Central and Eastern Europe
countries, where employment flexibility has become a major issue
and an area of conflict with unions. We focus on nine subsidiaries
in the Czech Republic, Slovakia and Hungary, and argue that
flexibility strategies were shaped by parent company practices, the
flexibility needs of individual affiliates and therelative strength
of labour in negotiating the implementation of these practices.
Given the relatively weak industrial relations institutions in the
region, the relative strength of labour is conditioned primarily by
market factors and parent company contexts. The findings thus
highlight the importance of political resources and agency of
actors in shaping employment policies.
Keywordsmultinational companies; employment relations;
flexibility; Central and Eastern Europe; Czech Republic; Slovakia;
Hungary; automotive sector
June 2014
European Journal of Industrial Relations, December 2015,
Forthcoming
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Electronic copy available at: http://ssrn.com/abstract=2454669
Electronic copy available at: http://ssrn.com/abstract=2454669
The employment flexibility strategies of automobile producers in
Central and Eastern Europe (CEE) constitute an issue of
considerable importance in its own right, but also represent a test
case for the factors influencing the development of employment
relations in multinational corporations (MNCs) and hence for the
development of thinking on comparative employment relations. We
examine nine assembly subsidiaries in the Czech Republic, Slovakia
and Hungary and focus on the influences on their employment
flexibility practices.
Employment flexibility is central to companies because they have
undertaken large-scale investment and need to recruit and maintain
an adequately skilled and motivated labour force. At the same time,
firms cannot guarantee a steady level of demand for individual
productsand therefore require variable labour inputs. How companies
reconcile these potentially conflicting needs varies, reflecting to
some extent the different market conditions they face but also
their different approaches towards employment relations. The aim of
this article is to investigate and explain these variations.
Below we discuss the determinants of employment flexibility
practices, then describe the plants analysed and the research
methods used. We then investigate the need for employment
flexibility in general and how that is conditioned by the strategy
of the parent company in terms of its production profile, network
and models. We proceed to address the power resources available to
employees and hence their ability to influence developing forms
offlexibility, and set out the issues relating to flexibility that
arose and were addressed in different companies. The concluding
section brings our arguments together, confirming the importance
ofa broad approach that takes account, first, of firms market
situations, strategies and influences from their home countries;
second, of employees ability to wield influence; and third, the
specific developments, negotiations and conflicts that determined
final outcomes.
Background: Literature and explanatory framework
Interpretations of MNC employment strategies in CEE have
involved three broad perspectives. The first is the role of the
business systems, home country institutions and specific strategies
of the incoming companies. The second is the established
institutional framework in the host country. The third is the
possibility of more complex interaction, involving different sets
of actors, between the first two.
The first has produced a body of literature that sees firm
strategies as determining practices in subsidiaries (Boxall and
Purcell, 2011) or that attributes employment practices in
affiliates to influences of the business systems and other
home-country institutions (Harzing, 1999; Whitley, 2001). However,
the extent of transfer of practices varies with the particular
fieldof activity. Technology is most likely to be centrally decided
and closely integrated production systems require coordinated
control. MNCs are less likely to integrate employment policies, as
these also depend on nationally specific legal, institutional and
historical circumstances (Cooke,2007).
Nevertheless, a central issue in this literature has been how
far MNCs transfer their domestic employment relations systems to
host countries, and the difficulties they may face in so doing. The
literature on home-country effects typically expects strong central
control over employment practices among North American MNCs,
employment practices linked to the
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participatory German model are considered difficult to transfer
beyond the institutional milieu of coordinated capitalism. MNCs
from coordinated economies, however, can develop a distinct
approach to employment relations in affiliates, , adapted to the
constraints and opportunities of the host environment (Ferner,
1997; Ferner et al., 2001). In CEE, the host-homecountry
distinction informed an empirical controversy over whether German
companies, representing the bulk of investors in the region,
imported their models of employment practices and industrial
relations or acted strategically and took advantage of CEE
locations to evade the constraints of coordinated capitalism;
evidence could be found for either possibility (Jrgens and
Krzywdzinski, 2009b; Meardi et al., 2009). Thus the question
remains open how far MNCs attempt, or succeed, in transferring a
system of employment relations practised in their home country. It
also remains unclear whether they locate in CEE as part of a
deliberate attempt to escape from their domestic system.
The importance of domestic environments has received relatively
little direct attention, possibly reflecting a view that they
represented a blank slate onto which MNCs could impose their chosen
models. However, MNCs need to cope with the systems of employee
relations that developed out of reforms from state socialism. These
incorporated central specification of minimum wage levels, holiday
entitlements and maximum permissible working hours and overtime
(Myant, 2014). More favourable conditions for employees were
permitted, and could be negotiated by collective bargaining. Trade
union representatives were given some legal protection and
collective agreements, usually signed annually, were binding on
both parties. Thus this was not a picture of unconstrained
flexibility, and employers were required to negotiate with employee
representatives over issues of irregular working hours. However,
unionmembership fell below 20% in all countries, from close to 100%
under the former regime, and bargaining coverage to below 50%.1
However, whether or not collective bargaining existed, many
conditions were generally above the minimum standards. That was
less true for issues of working time and its flexibility, over
which there were frequent conflicts and recourse to legal action
(Bluhm, 2007).
This points to the value of an approach that takes account both
of MNC strategies and of domestic environments and actors
(Drahokoupil, 2014). Actor-centred institutionalist approaches have
analysed employment practices as outcomes of micro-political
struggles between actors (Drrenbcher and Geppert, 2011), with
transfer of work practices conditioned by how these affect the
interests of local actors and by their capabilities and resources
(Ferner etal., 2012). A congruence of interests could lead to the
implementation of a work practice even when it does not match host
country regulations (which could be changed through lobbying or
reinterpreted in the affiliate). When there is opposition, outcomes
are conditioned by the resources individual actors can mobilize in
the negotiation, with power resources available to labour playing a
key role.
This provides the basis for the issues addressed in this
article. The complexity and variety of factors influencing the
development of employment relations points to the need for a broad
political economy approach (Edwards et al., 2007) that integrates
the institutional, market-based and political influences. Our
application of the approach to the study of flexibility strategies
puts particular emphasis on the power of labour, as is appropriate
for what has been one of the most prominent issues in negotiations
between employers and employee representatives, and on the market
contexts in which MNCs operate. Product demand conditions
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are of central importance for general company strategies, while
local labour markets condition both the need for flexibility and
the relative power of labour.
Cases and methods
Production of motor vehicles and components represents a leading
sector in CEE (Myant and Drahokoupil, 2011). It grew partly from
the transformation of a base inherited from the past andpartly from
scratch, thanks to inward investment by major MNCs (Pavlnek et al.,
2009). We conducted case study research in 2012-13 nine
motor-vehicle assembly plants in the three countries, which are
those most dominated by the automotive industry. Table 1 presents
an overview of the companies studied. They include those involved
in the first wave of foreign investment in the early 1990s (koda
Mlad Boleslav, VW Bratislava, Suzuki Esztregom and Audi Gyr) and
the production plants established on greenfield sites after the EU
accession in 2004 (TPCA Koln, Kia ilina, PCA Trnava, Hyundai
Noovice and Daimler Kecskemt). VW played a leading role in
exploiting the opportunities in CEE in the early transition years,
acquiring the Czech car producer koda in 1991 and a much smaller,
Bratislava-based producer BAZ. Only koda retained its own brand and
development functions. In 1993, VW subsidiary Audi established a
greenfield operation in Gyr. The history of Suzukis activity in
Esztregom goes back to a 1986 joint venture with a group of
Hungarian producers and international banks. The early entrants
gradually expanded production capacity. VW also upgraded and
diversified the product portfolio in Mlad Boleslav and Bratislava.
The diversity of countries and companies, themselves with differing
countries of origin, gives scope for demonstrating the effects of
variations in company approaches and of legal and institutional
influences.
[Table 1 about here]
We chose to analyse industrial relations and flexibility
policies in MNCs that set benchmarks for the sector. While this
article does not allow us to present each case in detail, the case
study approach is well suited for analyses of the micro-political
processes, actor constellation and preference formation in the
evolving niche institutional micro-climates through which
employment practices in MNC affiliates are established (Ferner et
al., 2012).
Case studies involved triangulating information obtained from
published sources and interviews with plant-level trade union
leaders and, where possible, management.2 Automotive specialists in
the relevant union federations in each country were also
interviewed. Interviews were semi-structured, allowing for
consistency as well as the exploration of emerging themes, with
questions covering labour market conditions, trade union
organization, bargaining history, the organization of flexibility
and the views of the different parties involved. Interviews
typically lasted two hours and were conducted in the interviewees
native languages; they were transcribed and often followed up with
questions of clarification. Information from interviews was checked
against published sources, mostly from company and union
publications, employeeand employer web sites and also from the
daily and weekly press. In this way, information in great depth on
individual policies (pay structures, working time systems,
frequency and nature
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of improvement proposals) and processes through which they were
introduced was collected and presented in internal case-study
documents.
The need for flexibility: The market context and business
strategy
The need for employment flexibility can be conditioned by the
production profile, as demand fluctuation for individual models can
vary. A diversified production portfolio should provide some
cushion against changing demand. Moreover, differences between
production models mayimply different skill requirements and thus
employment needs. The importance of these factors in conditioning
employment flexibility strategies is considered below.
Product profiles and production models
There are differences in product specialization which had
important implications for approachesto flexibility. TPCA, PCA, and
Suzuki were narrowly specialized in single platform, small cars.
koda, Hyundai and Kia produced a wider range of models, with koda
the most diversified. The significance of these differences is
taken up below.
The companies also brought differences in their human-resource
management (HRM) strategies.Toyota is considered as a paradigmatic
example of a quality production model relying on specific skills,
flexibility, team work, and worker input (Monden, 2011; Suzuki,
2004). It imported its payment system and features such as quality
circles into its Czech operation. Similarly, from the 1980s, German
car-makers followed a diversified quality model aiming at non-price
competition (Sorge and Streeck, 1988) and introduced an elaborate
structure to encourage ideas for innovation from the shop floor
into its central European plants. Hyundai brought a history of
adversarial labour relations, characterized by frequent strikes in
its Korean plants (Lee and Jo, 2007) and a reputation for an
engineering-led automation method of perfecting technology before
production which was said to minimize skill requirements and worker
input (Jo and You, 2011; Lee and Kang, 2012). However, it adopted
in total the Toyota payment system and, like the others, developed
programmes for rewarding innovative ideas from employees.
The differences in HRM were broadly confirmed in the companies
central European plants, but they did not appear to outweigh
greater similarities in the employment problems the companies
faced. Skill levels required appeared very similar, despite claims
of significantly different production models. In fact employees
could start on an assembly line after a few days relevant training
in all cases. There was published evidence from all cases of
measures to encourage and reward suggestions from shop-floor
workers. There were different approaches to employee input, but the
nature of innovations suggested by employees does not suggest much
impact on productivity. The structures of employment in the
production plants were broadly similar, with roughly two thirds of
employees performing blue-collar jobs with very basic initial
training requirements. All plants implemented some form of team
work, not presented as job
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enrichment, or a means of stimulating innovation, but rather to
allow task rotation for ergonomic reasons. Indeed, in all cases,
the overarching employment-relations problems appeared to be the
recruitment and maintenance of an adequately committed labour force
under conditions of fluctuating demand. These production models
were at best an aid to that while much depended on how employment
relations were negotiated between employers and employees.
Demand fluctuation
Automobile assembly requires a large fixed investment and a
large labour force, ranging in our cases up to 24,000. However,
fluctuations in product demand have a significant impact on labour
requirements. shows changes in annual output in the nine plants
over the period 2007-12. There was continual expansion in only one,
reflecting the relatively recent initiation of production by
Hyundai; decline over the whole period in three; and in five, a
significant fall in 2009, the worst year of the economic crisis. It
should be added that this understates the fluctuations in output
which were significant within individual years, notably 2009, as
well as between years. These fluctuations require variations in the
number of hours worked, which often means varying total employment
levels. Managements need to find means to combine this with
maintenance of a secure and committed labour force.
[Table 2 about here]
There were also shifts in demand for individual models. Smaller
cars did well in 2009, thanks to scrapping schemes introduced by
governments in a number of European countries which favoured
smaller, more energy-efficient vehicles. That helped TPCA and PCA,
where production continued to increase in 2008-9. But such cars
fared worse in later years. In TPCA, falling output turned into a
long-term decline from 2010. PCA also experienced a drop in
outputin 2010, but sustained expansion followed. Suzuki suffered a
permanent fall in output after 2008.
There is also a need for flexibility to adjust to demand over
shorter time periods, requiring extra shifts or short periods
without production. This depends on employee acquiescence (an extra
shift will require acceptance by a large enough part of the labour
force tomake production possible) and on labour law affecting
working hours. In all countries there were restrictions on
permissible overtime and specifications for the terms required and
provision for payment of a part of a normal salary during down
time. However, in every case there was some flexibility around
legal provisions: the employer either tried to ignore these or was
prepared to negotiate better terms with employees.
Power resources available to employees
Trade unions have a major role in enabling employees to exert
their voice within the companies.In general, unions in CEE suffered
a steady and almost uninterrupted decline in density from
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near universal levels in 1990 to significantly below the western
European average. Strikes were very rare, but the motor-vehicle
sector was an area of relative strength, though the majority of the
workforce was unionized in only a few cases; collective bargaining
was almost universal. provides information on union in the plants
and the number of officials released from work --- an important
indicator of union power. In all three countries, labour law
provided a basis for such release, and the conditions were subject
to collective agreements.
The Czech Republic and Slovakia each had one dominant union
centre, but there was considerable decentralization of power to
local organizations and considerable fragmentation, exacerbated by
specificities of their employment laws. The initial framework from
1990 guaranteeing union independence encouraged union pluralism,
allowing any union with three members to claim the right to sign
any collective agreement that might apply. This gave support to
very small organization, which existed at various times in all the
Czech plants studied. Hungary differed, having adopted a system of
works councils, which Czech and Slovak unions resisted, seeing this
as a threat to union dominance in collective bargaining. The
relative affinityof German and Hungarian institutions was reflected
in greater direct involvement by German unions in developing the
Hungarian industrial relations system. In the other countries,
foreign unions were active only at the very general level by giving
implicit support to collective bargaining.
Trade union strength, in the sense of ability to persuade
management to concede to union demands, reflected five key
influences. The first was the product market, which affected both
long-term company investment strategies and approaches to
collective bargaining. When demand was high, unions felt in a
stronger position; when it was low or unstable, they were more
likely to concede, or to moderate their demands. Employee
representatives consistently wanted higher investment, over which
they had no significant direct influence, and also wanted security
for those already employed. Companies could choose where to place
new investment and how to share out short-term output variations.
This was a background consideration in all bargaining; unions were
aware, even if these points were rarely explicitly covered in
collective agreements, that concessions on pay, conditions and
flexibility could bring benefits in employment security and perhaps
investment.
The second influence was the local labour market: labours power
was enhanced when management had to offer attractive conditions to
secure an adequate labour force. Hyundai, Kia and Suzuki were in
areas of high unemployment and had no difficulty recruiting; koda,
VW Bratislava TPCA were in areas of labour shortage, which made
them more likely to concede to union demands. PCA experienced
recruitment and turnover problems in the boom years of 2006-07,
which it addressed by using agency workers from abroad. TPCA
suffered extremely high labour turnover in its first months of
operation when demand for products was high, and responded by
providing accommodation to attract workers from further afield (851
flats were promised for core workers), subsequently improving pay
and other conditions as demanded by union representatives. VW
Bratislava found the local labour market tight and offered
conditions to attract workers from a wider region.
The third influence was the historical legacies. Workplaces
inherited from state socialism started with universal union
membership, and it was much easier to keep a high level than to
build it up from scratch in a context of employee scepticism and of
possible confusion from competing organizations. This gave the koda
plants the largest union organizations and
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enabled them to appear as leaders in setting union agendas. By
contrast, Hyundai and Kia Suzuki were relatively recent greenfield
investments; union representatives complained of initially strong
hostility and of continuing extreme difficulties in operating
within these plants. In Hyundai no union representative was
released from work, there was no union office on the premises, no
union activity was allowed during working hours and the media
reported periodic complaints of threats to union members, typically
of reclassification into a lower bonus band.
The fourth influence was the labour relations policy of the
parent MNC. Investors came with different conceptions, both in
terms of detailed employment practices and of the value
theyattached to good relations with employee representatives.
However, the transfer of any practicesalso depended on a fifth
influence, the scope for employee international contacts, including
the ability to influence trade union, and more generally public,
opinion in the MNCs home country.This marked an important
difference between Asian and European MNCs. German automotive
multinationals possess developed systems of codetermination with
strong union presence (Haipeter et al., 2012), and they recognised
trade unions in all our cases. That was practically inevitable in
koda as the plant inherited near universal union membership;
elsewhere it was a reflection of the power of local union
organizations, in the sense of their ability to impose heavycosts
on MNCs that dragged their feet over recognition. Indeed, two
prominent German companies, Bosch and Siemens, had resisted unions
in the Czech Republic (Bluhm, 2007; Myant, 2014), but were hit by
adverse publicity, both locally and in Germany. This proved an
important weapon in persuading them to choose a more conciliatory
approach, but did not determine the precise forms of employee
representation. It meant accepting the system already emerging in
the CCE countries, with collective agreements negotiated annually
with union representatives. These negotiations were conducted by
local personnel managers, often natives of the country concerned.
Union representatives felt able to negotiate over almost any issue
without their negotiating partners needing to refer to a higher
authority, with the one clear exception of the total wage bill.
The point here is not that German companies automatically
transferred practices from home. Geographical proximity, ease of
contact, legacies of past history and powerful unions in the home
country ensured a practice of recognising and negotiating with
employee representatives (Bluhm, 2007; Krzywdzinski, 2011). There
was more scope for transfer of practices to Hungary, with its
system of employee representation closer to that of Germany. In
atleast one case, that of Daimler, the whole structure of
employment relations in the parent company shaped that of the
affiliate, with its European Works Council and the Rastatt works
council heavily involved in helping to establish German-style
institutions of employee representation.
Structures of social dialogue had an important role also in
Toyota, the dominant parent of TPCA, and in PSA (Delteil and
Dieuaide, 2012), and those employers accepted from the startthat
they would recognise and negotiate with unions. In contrast,
Hyundai and Kia had a background of adversarial labour relations,
with pervasive distrust between management and strong unions in
Korea (Lee and Kang, 2012). Union representatives in the Czech
Republic and Slovakia had minimal, and largely unproductive,
contacts with their colleagues in Korea and could not threaten
their employing companys image in its home country. Suzuki also
practised adversarial industrial relations in its operations
outside Japan and could effectively prevent
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unions from operating in the Hungarian plant, resorting in 2006
and 2009 to what courts later confirmed to be unlawful dismissal of
union organizers.
Flexibility regimes
Companies can respond to demand fluctuations in three ways.
First, numerical flexibility can beachieved through adjusting the
total number of employees. Specific policies reflected
company-level practices, but the detailed forms depended on local
negotiations. The unions were most concerned with protecting the
core workforce. Their negotiating power was weak when product
demand plummeted, making them more likely to make concessions on
other flexibility issues and pay. Second, production or employees
can be moved between models and/or plants. The scope for such
adjustments depends on the type of production network and thus the
general business strategy. Third, work-time flexibility can be
achieved by adjusting hours across a period. Here, the role of
local negotiations and the relative power of unions was the
strongest. MNCs tended to pursue their default policies, but were
prepared to adjust these when faced witheffective resistance from
the unions. This section discusses developments of each type of
measures across the cases. Error: Reference source not found
provides an overview of their use.
[Table 3 about here]
Numerical flexibility
All firms used agency workers, who were the first to be
dismissed in times of falling demand. Under EU law, agency workers
should have comparable working conditions to core workers (Schmann
and Guedes, 2013), but their pay levels in CEE are hardly ever set
by collective bargaining and are therefore not made public.
Evidence from koda revealed pay and conditionsthat were clearly
inferior; agency workers were often from another country and, not
being directemployees of the MNC, were not expected to join a
union. Trade union representatives in practice accepted their
presence without seriously questioning numbers and typically
without taking up their complaints.
Numbers varied, as employers used this source of labour to meet
temporary shortages and to provide a cushion for times of falling
demand. Only Audi followed the rule of capping agency workers at 5%
of the labour force, set for the VW group as a whole in an
agreement between management and international union
representatives in November 2012.3 In VW Bratislava, a higher
ceiling of 12% was agreed in 2013. In PCA, in the absence of a
global agreement, the unions negotiated a 20% cap. Again without
any formal agreement, Hyundai increased agency workers to around
25% of the total labour force in 2012 and 2013. Most were from the
local area, and agency work was used not just for numerical
flexibility but as a probationary period before an employee could
graduate into the core labour force.
Only in koda was there open conflict over the status of agency
workers, after a complaint from the Polish Ombudsman in 2008,
representing Polish agency workers.
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Investigations by the Czech Ombudsman and the Czech Labour
Inspectorate left no doubt that the law on equal pay for agency
employees had been broken, with some employees being paid below the
legal minimum. This led to a threat of strike action by some agency
workers and to a fine imposed on one of the agencies. Managements
reaction, in view of bad publicity and of theneed for good
relations with a stable core labour force, was to seek to reduce
its dependence on agency workers, even setting at one point a
target of zero. Indeed, with rapidly falling demand at the end of
2008, almost all agency workers were dismissed and their work was
taken by the core employees, following only one-day retraining
courses. However, as demand recovered through 2009, so the number
of agency workers quickly grew again, averaging 8% of the total
labour force in 2012. Management then agreed, after negotiation
with the union, to regularize the conditions of agency workers, to
consult with unions over employment conditions and to hire mostly
Czech employees. As agency workers did gradually join the main
union, so they could raise their complaints, the most frequent of
which was that their pay had been inaccurately calculated or that
they were entitled to only very limited holidays given their
short-term contracts.
Achieving numerical flexibility by varying the core labour force
proved more difficult. Outcomes again reflected negotiation between
employers and trade unions. The latter were more determined on this
issue, but had little by way of sanctions with which to threaten
employers. Unions were therefore likely to make concessions on
other flexibility policies and pay when faced with threats of
lay-offs. Thus VW Bratislava experienced a particularly severe drop
in demand in 2008-09 and, after dispensing with agency workers,
sought 700 voluntary redundancies from the core workforce. The
unions later attributed their support for the Flexikonto,
implemented with their support from 2009, to their experience with
the downturn. In contrast, Suzuki took a less accommodating
approach to employees: in 2009, 1200 core workers were forced to
leave, together with 400 agency workers.
The issue was acute in TPCA as demand fell for its small car.
This plant also had great potential difficulties in recruiting
labour when demand was expected to recover, with a completely new
model due to be introduced in 2014. Unions accepted wage deals in
2010-12 below the levels agreed in koda --- the usual benchmark ---
in return for commitments of no redundancies among the core
workforce. By 2012, the remaining 150 agency workers were to leave
and 250 core workers accepted voluntary severance on terms better
than those required bylaw. Other core workers left through natural
wastage, and employment fell rapidly from its peakof 3600 in March
2010 to 2400 in 2012. Negotiations for the 2013 collective
agreement, following falling output and deteriorating financial
results, ended with another low pay rise (1.9% for most employees)
but improved compensation for compulsory redundancies. There was no
serious possibility of pressing for more by threatening strike
action, as advocated by a group of employees, when compulsory
redundancies seemed inevitable to many employees.
In PCA, stagnating demand threatened the viability of a third
shift, introduced in May 2012. The collective agreement for 2009-11
included an employment guarantee, which reflectedthe requirements
of investment subsidies that the firm negotiated with the
government. In the 2013 negotiations, unions accepted a wage
freeze, work time reductions and concessions on the terms of
work-time accounts in exchange for maintaining three shifts. As
elsewhere, the primaryconcern was security for the core workforce,
and a great deal was conceded to protect that.
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Shifting production and employees across plants
Flexibility was also achieved by shifting between models within
a plant or shifting production between plants. These were frequent
practices within the VW group. Part of Octavia production was
transferred to Bratislava in 2008, because of inadequate capacity
in the Czech plants. Shifting between models within a plant, an
option available only to plants with multi-model capacity such as
koda, was so useful for protecting core workforce stability that
the Hyundai and Kia plants exchanged production of models in summer
2011, despite costs involved in the ensuing duplication of some
capacity. Each plant then had one larger and one smaller car. As
these moves represented no threat to any core labour force, it was
relatively easy to secure employee acquiescence.
Moving employees within or between plants would appear more
difficult, but was relatively easy for Volkswagen and PCA. In April
2009, when the car-scrap scheme in Germany enabled a return to full
production in koda, Volkswagen started transferring workers to the
Czech Republic from its plants in Slovakia. TPCA was also able to
ease labour problems in 2009 by bringing workers from Toyotas
Polish plant, which was facing falling demand. In 2012, employees
were moved to PCA and its suppliers, although this proved only a
temporary solution. Enough employees were willing to accept the
moves when the alternative was possibleredundancy. In some cases it
was quite attractive: VW workers in koda enjoyed a higher pay given
the appreciation of Czech currency, TPCA employees moving from the
Czech Republic were themselves originally from Slovakia.
Work-time flexibility
The strength of labour and legal provisions all played parts in
determining the use of work-time flexibility. National legislation
specified a minimum percentage of normal pay to be received during
downtime and maximum permitted hours, plus requirements for
employee acceptance of overtime. Actual practice varied between
improved terms for downtime and overtime pay abovethe legal
minimum, as demanded by unions, and attempts to ignore the legal
requirements altogether. The former was the more usual. Where
unions were relatively strong, as at koda, TPCA and VW Bratislava,
both downtime and extra shifts were compensated well beyond legal
minima.
An ongoing theme for German MNCs was the introduction of the
Flexikonto, a flexible work account within which downtime could be
set against overtime. This helps the employer to cope with
short-term demand fluctuations by cutting costs of downtime and by
ensuring an adequate turnout from regular employees for extra
shifts. The alternative, paying a fixed proportion of regular pay
during downtime and tempting volunteers into extra shifts by
offering supplements to stipulated overtime pay, would either be
less reliable or more expensive. The Flexikonto is therefore
desirable for management, but not a necessity in countries where
pay levels are considerably below those in Germany and where labour
is a small share of total costs.4 Any benefits depend on the time
period over which plus and minus shifts are required to
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balance because, if extra shifts are not made available after a
certain period, then all schemes require substantial compensation
for down time.
German law allows various forms of work-time accounts and German
companies soughtto introduce the same solution in CEE. VW
Bratislava negotiated a Flexikonto in the second halfof 2008 in the
absence of an appropriate legal framework, and then persuaded the
government to change the legislation, allowing for flexible work
accounts with a four-year reference period. In Hungary, Audi
persuaded the government in 2009 to allow extensions beyond the
existing 12-month accounting periods. In PSA, the parent of PCA,
work-time accounts were negotiated after 2008 (Delteil and
Dieuaide, 2012). In Slovakia, PCA implemented a Flexikonto from
2009 and negotiated an extension of the accounting period to 30
months in 2013, in exchange for employment guarantees. In TPCA,
without any explicit reference to the German model, there was a
system for 203 shifts per year with some flexibility over when they
would be required.
In koda, despite enthusiasm and apparent determination from the
personnel director, aneffective Flexikonto system was blocked by
employee opposition. Employment law allowed collective agreements
to include flexible work accounts over a 12-month period, but the
large and well-organized trade union had a strong bargaining
position and, unlike unions in other automotive plants, had staged
successful strikes. This partly reflected the importance of koda
within the VW groups production plans and the need for management
to tread carefully to ensure an adequate core labour force. In
2010, agreement was reached on a trial system with a one-year
accounting period, but employees did not like the loss of bonuses
for extra shifts and the need to work at weekends with only a few
days notice. The union thus entered negotiations on the basis of a
total rejection of flexibility. As a compromise, a 4-month
Flexikonto was agreed for 2011. This very limited flexibility could
hardly ever be of practical use to the employer, which continued to
rely on compensation for downtime and bonuses for voluntary extra
shifts.
An opposite extreme is represented by Hyundai, which in Korea
relied on ad hoc solutions and long working hours (Lee and Kang,
2012). The same approach in the Czech Republic provoked open
conflict shortly after the plant was opened in 2009. Following a
failure to meet production targets, the company imposed extra
overtime of 2 hours practically every day. Its own publicity
confirmed that often it not give even two days notice of overtime
requirements, but refusing to work extra hours was treated as
unexcused absence. Under Czech employment law, compulsory extra
overtime was permitted only for serious operational reasons. The
response was a one-hour strike by 400 employees, an extremely rare
event in a country with hardly any strikes. The union, although not
the initiator, quickly stepped in to negotiate an agreement for no
victimization of those involved, an end to compulsory overtime
outside quite exceptional cases, investigation of cases of alleged
bullying and better consultationin future. The legal position was
soon clarified as the local Labour Inspectorate, having seen
reports of the dispute, undertook an investigation in early 2010
and found the company to be in serious breach of almost 50 laws and
regulations, and imposed a fine. From then on, extra shifts were a
matter for negotiation, with higher payments to encourage
participation.
However, demand levels continued to fluctuate, raising the
possibility of abolishing a recently-introduced third shift or
otherwise reducing in working hours. By law any down time had to be
compensated at 60% of average pay, but in late 2012 the management
proposed additional days of closure which would be unpaid, with
employees using existing holiday
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entitlements or requesting unpaid holidays. The union felt
unable to offer serious opposition. Its position was weak, with
only about 15% of employees in its ranks, and it saw no chance of
calling a strike or even a protest meeting. Using the law to oppose
management plans, since voluntary holidays under Czech law cannot
be imposed on employees who do not want to take them, was also not
favoured. A veiled threat from management was that the alternative
would betotal abolition of the third shift and significant job
losses; and, without seeking agreement from union representatives,
it quickly sought and found volunteers. The union judged it very
difficult to do more than reach the best agreement possible when,
as a union leader explained, some managers have wooden heads and
interpret labour law as they like, or as somebody is telling them
to (Forum Hyundai Noovice, 2012).
Finally, Suzuki implemented a Flexikonto with a 4-month
accounting period, claiming no urgent need for a more substantial
flexibility policy. In any case, an extension of the accounting
period was complicated by its hostile approach to the union, as the
extension would require negotiation of a collective agreement.
Discussion and conclusion
The theme of labour flexibility demonstrates how employee
ability to exercise a degree of power over employment relations was
developed in, and varied between, plants of foreign MNCs in the
automotive industry. We can set out two ideal-type extreme cases.
In one there is respect for the provisions of employment law, full
union recognition and prior consultation on all employment
relations issues, general security of employment, restrictions on
numbers of temporary or agency employees (if used at all), full
compensation for any time not worked and substantial extra pay for
extra shifts which are undertaken fully voluntarily. At the other
extremethere is opposition or reluctance to recognise and consult
with trade unions, high levels of instability and a high share of
clearly insecure temporary or agency workers. Variations in working
hours are at best subject to the minimum of legal protection and
laws may be circumvented or ignored. This would seem a lower cost
option for an employer, but one more likely to lead to conflict and
less likely to ensure an adequate and stable labour force.
These extremes are loosely approximated on the one side by
German multinationals andon the other by some Asian companies. The
outcomes could be set on a scale, with Suzuki at one end and koda
at the other. The differentiating factors are the five influences
on power resources set out above: product and labour market
conditions, historical legacies, labour relations in the parent MNC
and employee ability to influence opinion in the companys home
country. These factors explain key features of firms strategies
related to our three themes: how far they recognise and accept
established legal positions, or conversely try to modify or ignore
them; how far they choose to recognise and negotiate with employee
representatives; and how far they seek to bring ready-made systems
for employee relations from their home countries.
In no case did incoming MNCs seek major changes in employment
law. Changes they argued for were essentially incremental, allowing
greater scope for flexibility in forms that their specific
experiences led them to favour, the obvious example being the
Flexikonto. Beyond that,they did not advocate systematic
liberalization, and preferred either to accept what existed or to
try to ignore it. Accepting the established legal framework
appeared to be automatic where
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unions were well established, albeit with one big reservation:
agency workers, whom unions were implicitly happy not to represent.
The case of koda shows that agency workers had to find their own
levers of power, with the use of law and the threat of damaging
publicity against the employer.
Work-time flexibility was an important issue for ensuring the
law was respected. Where employees were in a strong position they
had little difficulty securing conditions more favourable than
those set out in the law. Where they were weaker, as in Hyundai,
they had to usea degree of collective strength to enable effective
intervention from the legal authorities, and even then full respect
for the law remained an issue of conflict.
Recognising trade unions as negotiating partners was not a legal
requirement, but became fairly automatic for MNCs either coming
from, or heavily committed in, western Europe. Their plants also
tended to be in areas where labour markets were tighter and
employee power was correspondingly greater, making it impossible to
assess the relative importance of different causal factors. Trade
union recognition was less automatic for Hyundai, Kia and Suzuki,
coming as greenfield investments in areas of high unemployment, but
proved unavoidable in the first two of these. It is worth noting
that, whether or not unions were recognised, some employment
relations issues seemed not to cause conflict. Payment and grading
systems, developed in the firms home countries, were imported
without offending employees interests and therefore did not depend
on a particular balance of power.
However, flexibility practices were an obvious area of interest
conflict, and they were conditioned by negotiations between
management and unions, with outcomes dependent on the overall power
relations. That included all the elements mentioned above,
including market conditions, international contacts and historical
legacies. These set the broad power relations, while the course of
the negotiations and particular approaches of negotiators at the
time determined the final outcomes. Thus differences in flexibility
regimes reflected to some extent choices made by negotiators as
they balanced this issue against others: pay increases,
short-termemployment security and prospects for new investment or
the run-down of existing plants.
The development of flexibility regimes needs to be understood in
the context of trends in employment relations as a whole. It was
not a simple matter of firms transferring practices from their home
country, nor of their choosing CEE countries to escape from
employment relations in their home countries. They were attracted
by lower wage levels; but beyond that, their approach to employment
relations required a degree of adaptation and improvisation as they
negotiated with established local actors.
Notes
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Table 1. Plant overview
Location Home country of MNC
Site profile Employment 2013a
Union density (%)
Officials released from work
koda Mlad Boleslav, Kvasiny and Vrchlab (CZ)
Germany (VWgroup)
VW acquisition from 1991, own brand with independent
functions
24,000 70 15+
TPCA (Toyota PeugeotCitron Automobile)
Koln (CZ) Japan (Toyota,joint venture with PSA)
Assembly from 2005 (mini car)
2,000 24 1 (difficulties caused by internal divisions)
Hyundai Noovice (CZ) South Korea, links with Kia
Assembly from 2008 (various platforms)
3,400 15 0
Volkswagen Bratislava(SK) Germany Assembly from 1992 (various
platforms)
10,400 70 10
PCA (PSA Peugeot Citron)
Trnava (SK) France (PSA) Assembly from 2007 (small cars)
3,400 32 2
Kia ilina (SK) South Korea (33% owned by Hyundai)
Assembly and engines from 2005 (various platforms)
3,800 28 0 (1 from mid-2013)
Suzuki Esztregom (HU) Japan Assembly from 1992 (subcompact
platform)
2,950 5 0 (union not recognised)
Audi Gyr (HU) Germany (VWgroup)
Engines from 1993, assemblyfrom 1998 (Golf V platform)
9,500 56 3 (5 from Oct 2013)
Daimler Kecskemt (HU)
Germany Assembly from 2012 (focus on compact cars)
3,200 30 2 (plus works council chair)
a including agency workers
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Table 2. Output change relative to previous year (%)
2008 2009 2010 2011 2012koda 3.02 12.48 9.04 16.79 2.58TPCA 5.13
2.53 11.06 8.46 20.58Hyundai 879.25 69.61 25.49 20.66VW 24.41 44.52
38.55 45.62 99.53PCA 5.56 7.89 9.20 10.13 4.88Kia 38.93 22.95 50.59
9.80 15.89Suzuki 21.36 34.19 7.72 0.76 9.00Audi cars 5.93 45.98
18.21 2.53 15.09Audi engines 0.66 27.18 19.09 14.30 1.69
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Table 3, Flexibility regimes
Agency workers Model/plant flexibility Employee transfers
Work-time flexibilitykoda 2007: 16%
then reducedOctavia to VW Bratislava,a Seat model to Mlad
Boleslav
From VW Bratislava 2010: Flexikonto trial2012: improved bonus
forextra shifts
TPCA peak 17%2013: none
To PCA 203 shifts per year system
Hyundai 24% Swaps with Kia Unsystematic, including compulsory
overtime/holiday
VW 12% Octavia from koda To koda Flexikonto from 2009PCA 12%
From TPCA From 2009Kia 6% Swaps with Hyundai UnsystematicSuzuki
Peak 20%
2013: noneFlexikonto used minimally
Audi 3%capped at 5%
Internal (to supporting activities)
Flexikonto agreed 2001.
Daimler 8% Flexikonto since 2012
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1 See Visser (2013). The figures for CEE are, however, imprecise
and probably overestimate the actual unionization rate.
2 HR managers were interviewed in Audi, Daimler, PCA, Suzuki and
VW Bratislava, where a member of the executive board was also
interviewed. In Kia, the head of employee relations was
interviewed.
3 Individual plants can, under certain conditions, deviate from
the rule, if agreed with employee representatives. See
http://www.labournet.de/wp-content/uploads/2013/04/VW-Charta-der-Zeitarbeit-2012-.pdf.
4 Labour costs in koda amounted to only 7.7% of total production
costs in 2012.
Background: Literature and explanatory frameworkCases and
methodsThe need for flexibility: The market context and business
strategyProduct profiles and production modelsDemand
fluctuation
Power resources available to employeesFlexibility
regimesNumerical flexibilityShifting production and employees
across plantsWork-time flexibility
Discussion and conclusionReferences