Last year, the world was abuzz with anticipation for the electric vehicle (EV) era. But while governments and businesses were sharing rosy projections for the future vehicle industry, one topic did not receive enough discussion: the growing pains that future vehicles will bring to society. Some of the issues that have yet to be tackled in earnest include restructuring the entire automobile industry and undoing traditional labor relations. In a two-part series, we examine future cars’ negative impact on society. “Does democracy end at the factory gate? As for now, democracy cannot be said to be in the Tesla factory.”That was what the spokesperson of German metalworkers’ union IG Metall recently told the Hankyoreh over email. The spokesperson was talking about Tesla’s Berlin Gigafactory, which is slated to begin operations this summer. Many Germans have pinned their hopes on the Gigafactory, which is set to become Europe’s biggest production site for electric cars and batteries. The factory is a shot in the arm for Germany, which has been ailing from the downfall of the internal combustion engine. It’s also a trophy, showing that Germany came out ahead in a fierce competition with other European countries. Built for 4 billion euros, the factory is supposed to employ 40,000 people and produce 500,000 vehicles a year — tantalizing figures, to be sure. Since the shift to electric vehicles is sure to precipitate painful restructuring in the auto industry, Tesla’s jobs are welcome news for workers. But not everyone is smiling in the German automotive industry, especially at the metalworkers’ unions. They’re worried that labor relations in Germany — which have evolved over the course of a century — could be demolished almost overnight by Tesla’s arrival. Others predict that Tesla will eventually have to bow out of the German market, just as US discount retailer Walmart did over a decade ago after failing to reach a modus vivendi with the unions. Tesla ignores 45 years of collective decision-making So what’s behind all the doom and gloom? A spokesperson for IG Metall told the Hankyoreh on Feb. 27 that Tesla is projected to be the only German automaker that’s not subject to the system of Mitbestimmungsgesetz, or codetermination. The codetermination system, which was codified in law in 1976, empowers workers to take part in management. Under the system, workers and management have equal representation on the supervisory board of directors, which deals with matters that affect the company as a whole.Codetermination is regarded as one of the key elements behind the competitiveness of German manufacturing. Many say that letting labor take part in company management helps mitigate conflict with management and increase productivity.That’s why the system has remained in place over the years, even as some companies complain that it limits managers’ options. In a speech marking the 30th anniversary of codetermination in 2006, German Chancellor Angela Merkel observed that Germany had the fewest days of strikes in Europe, an achievement she credited to codetermination.
Codetermination is obligatory for all companies above a certain size — except Tesla, which appears to have sidestepped that requirement through a “legal loophole,” IG Metall explained. Tesla bought an existing Societas Europeae and changed its corporate name instead of setting up a corporation of its own. A Societas Europeae, also called a European Company, is a company set up under the corporate law of the European Union. The category was created to facilitate corporate activity across various parts of Europe. One of the characteristics of a Societas Europeae is that it only has to comply with common laws in the EU, rather than the laws of any given member state. As a consequence, it isn’t subject to Germany’s system of codetermination. In effect, Tesla won’t be able to replicate Volkswagen’s success in the 1990s at avoiding punishing layoffs through a compromise between management and labor over employment stability and working hours. Tesla has also reportedly rejected collective bargaining. Instead, it plans to carry out wage negotiations with individual workers. IG Metall says it requested a meeting with management in March 2020 but has yet to receive a
reply.That’s humiliating treatment for Germany’s largest union, with 2.3 million members. It also spells trouble for Tesla’s relationship with the union over the coming years. “Despite all reports and rumors, we will give Tesla the benefit of the doubt. After some time, we will see how things evolve,” IG Metall said.
Musk suggests union members will have to forfeit stock options German workers have another reason to be anxious. In the US, Tesla already has a bad reputation for its anti-union stance. In the best-known incident, a judge ordered the company to reimburse factory workers after it blocked them from making a union in 2016. That was when Tesla CEO Elon Musk’s antipathy for unions became widely known. According to a decision by the US National Labor Relations Board, employees at a Tesla plant in Fremont, California, launched a campaign to organize a union in fall 2016 with the help of the United Auto Workers (UAW), a major American labor union. The campaign, called “Fair Future at Tesla,” was organized by Jose Moran, an employee at the Fremont plant. “I often feel like I am working for a company of the future under working conditions of the past,” Moran wrote in a blog post that got a lot of press. “A few months ago, six out of eight people in my work team were out on medical leave at the same time due to various work-related injuries.” In the same blog post, Moran wrote that workers were exhausted from working 60-70 hours a week, but that they relied financially on the overtime because Tesla wages are much lower than those of other automakers. Musk responded swiftly. In a meeting with Moran, he promised to take care of any issues before a union could be formed, but also warned that Moran and his colleagues shouldn’t expect UAW to speak on their behalf. Musk also banned workers from passing out union pamphlets and wearing pro-union buttons. As efforts to organize the union geared up, Musk even hinted that employees who joined the union wouldn’t receive stock options. “Nothing stopping [the] Tesla team at our car plant from voting union. [They could] do so [tomorrow] if they wanted. But why pay union dues & give up stock options for nothing?” Musk wrote in a tweet on May 21, 2018. In September 2019, the National Labor Relations Board found Tesla’s acts to be in violation of the National Labor Relations Act and ordered the company to take corrective measures. But that ruling doesn’t seem to have substantively changed Tesla’s basic stance. There’s still no labor union at the Fremont plant, and Musk has continued to spar with labor activists. Last year, Tesla reopened a factory that had been closed as part of government measures designed to stop the spread of COVID-19. When UAW criticized Tesla’s move as illegal, Musk countered by sharing an article stating that Tesla had implemented verified disease control measures. In a time of flux, labor relations face an uncertain future Tesla’s opposition to unions has raised troubling questions for the global automotive industry. As we enter an era of electric and autonomous vehicles, the boundaries of the auto industry are growing more fluid. Numerous IT firms — including Tesla, Google (Waymo), Amazon (Zoox), Apple and Baidu — have thrown down the gauntlet to the auto industry.Inevitably, such companies are constitutionally very different from traditional automakers. Silicon Valley is famously “allergic” to unions. That suggests that Tesla will not be the only company to challenge norms in the auto industry in the years to come. It’s also symbolic of the transfer of power brought about by changes in the industrial paradigm. It’s no longer hardware but software that’s bringing most of the value-added in the auto industry. Amid such changes, workers on the traditional production line are likely to keep losing bargaining power. In addition, this appears destined to usher in a new phase in labor relations in the auto industry. Tesla seems to offer a preview of the auto industry of the future, but is that future set in stone? Experts say that a clash between traditional interests and new forces in a transitional period can cause conflict to spread throughout an entire industry. “In the end, Tesla can act so [boldly] because it thinks it’s in a much stronger bargaining position [than the labor unions], but the unions don’t want to accept that,” said Lee Hang-gu, an analyst at the Korea Automotive Technology Institute. “Moving forward, we’re going to see even worse conflict and restructuring in the auto industry because of the digital divide. What action we take in response is of crucial importance.”