Worker Participation Culture Clash: Tesla vs. German Unions

The Tesla boss is getting a taste of Germany’s staunch labor laws during a clash with union representatives at one of his key subsidiaries.
Workers at Grohmann Engineering are divided in their opinions of their new boss. Picture source: AP

Last November, Silicon Valley icon and Tesla CEO Elon Musk visited Grohmann Engineering in the quaint, western German town of Prüm to personally announce the company's takeover. At the time, employees at the mid-sized German company were filled with pride to soon belong to the vast Tesla empire led by one of the world's most innovative CEOs.

But only sixth months after Mr. Musk’s visit, spirits at the engineering firm are at an all time low. The company’s founder and former Tesla executive, Klaus Grohmann, is rumored to have been ousted over a dispute with Mr. Musk and the firm’s labor representatives are anything but impressed with the tycoon’s American work ethic.

Workers councils and unions traditionally wield siginificant power in Germany, where company's with more than 200 employees are legally required to elect a designated employee representative, solely in charge of handling labor concerns. Workers at smaller companies of at least five employees also have the right to appoint a representative, but that person still needs to fulfill regular work duties.

Mr. Musk is currently receiving a personal lesson on the far-reaching influence of German labor representatives – the antithesis of  freewheeling corporate culture in California. At Tesla’s Palo Alto headquarters, employees are expected to show limitless devotion to their work and Mr. Musk himself is known to spend the night in a sleeping bag under his desk if work is piling up and he is unable to go home.

In contrast, Germany's rigid overtime payment laws and fixed working hours are completely foreign to the South African-born entrepreneur.  Mr. Musk didn’t beat around the bush in his letter to Grohmann employees, where he described the representatives of the IG Metall, Germany's most powerful union, as people with outdated values who are stuck in the past and who don't share Tesla’s vision for sustainable energy.

Elon Musk’s job guarantees and the wage increases he announced are all pointing in the right direction, but they aren’t legally sound. Christian Schmitz, IG Metall union representative

But Mr. Musk, who bought the German company to ramp up production to 500,000 cars per year until 2018, now has to grapple with union representatives such as Christian Schmitz and head of the Grohmann workers council, Uwe Herzig. Mr. Herzig, a friendly 54-year-old with a gentle voice, has been with the company for more than 30 years.

Traditions are important at Grohmann, one of the many Mittelstand-companies that make up the backbone of the German economy. Long-term employees are congratulated in person by both Mr. Herzig and Mr. Grohmann himself for working anniversaries, which include a photo in the local newspaper.

That world is a far cry from Mr. Musk’s reality and the hire-and-fire mentality at many US companies, where lavish employment contracts that sometimes include a 6-months cancellation period and more than 30 days of paid vacation are inconceivable.

As the two worlds clash, Mr. Musk is forced to make some concessions. With Tesla recently overtaking GM and Ford as the most valuable carmaker in the United States, the Grohmann labor representatives want to make sure their workers receive their piece of the pie.

“The wages at Grohmann are about 25 to 30 percent below German average,” said Mr. Herzig, adding that many of the desperately needed professionals were leaving for other companies. But a manager at Grohmann rejects claims that the company was underpaying its workers across the board.

Today, more than half of the roughly 700 Grohmann employees are union members. Mr. Musk has bowed to union pressure, agreeing to up monthly pay by €150 ($163). Moreover, every Grohmann employee is set to receive Tesla shares worth $100,000, as well as a €1,000 cash bonus. Mr. Musk also offered workers an employment guarantee until 2022. But Tesla said it would only be able to sit down with Grohmann worker representatives later this month.

The union members interpret this as a stalling tactic. “Elon Musk’s job guarantees and the wage increases he announced are all pointing in the right direction, but they aren’t legally sound,” Mr. Schmitz said.

Still, for some Grohmann employees, the debate stirred up by the union representatives is unnecessary. “Completely insane” is how one technician described it, adding that he was happy about Mr. Musk’s investment. But the question remains: for how long?


Jürgen Salz, Stefan Hajek and Martin Seiwert are writing for WirtschaftsWoche, a sister publication of Handelsblatt Global. To contact the authors: [email protected]