Berlin These are not easy times for the metal and electrical industry. Production was already five percent below the previous year’s level in 2019. The economic downturn as a result of international trade disputes and the Brexit uncertainty weighed on the key industry.
In addition, there is the structural change, the automobile manufacturers and their suppliers have to comply with the climate targets and move away from the combustion engine. And now the corona pandemic is affecting not only the metal workers, but the entire economy. Entire car factories are at a standstill, supply chains are in danger or have already broken, sales markets are breaking down.
The employers and IG Metall responded to the difficult situation with the wage agreement reached in North Rhine-Westphalia in March, which has now also been adopted by the other districts with regional variations. The conclusion stipulates that vacation and Christmas bonuses are added to the monthly wages proportionally – this increases short-time work allowance when companies no longer have any orders.
The short-time allowance can also be increased if necessary with a hardship fund, into which employers pay € 350 per employee. Only in Baden-Württemberg is there a further regulation.
But will that be enough to get through the crisis? Two thirds of the companies in the metal and electronics industry are already working short-time or are planning to do so, IG-Metall boss Jörg Hofmann said in an interview with the Handelsblatt. Almost every fifth company sees acute or medium risk of bankruptcy in the next three months. Hofmann therefore calls for a general increase in short-time work benefits by politicians – and a longer period for unemployment benefits.
Read the interview with IG Metall boss Jörg Hofmann here:
Mr. Hofmann, how bad have the economic effects of the corona pandemic been so far in the organizational area of IG Metall?
We surveyed almost 4,000 companies last week. Around a third report a complete demolition, especially in vehicle construction, in the steel sector and in the automotive trade. At 37 percent, the volume of orders is clearly limited, comparable to a normal economic crisis, at a quarter nothing has changed and full utilization report four percent.
How much do companies suffer from the fact that the economy in other countries is largely at a standstill?
The supply chains are already disrupted in around a third of the companies surveyed and in a further third at risk. Vehicle construction is particularly affected here with its dependencies in Italy and Spain.
What does that mean for the jobs?
Two thirds of the companies are already working on short-time work or are planning to do so. Here too, vehicle construction and the steel industry are particularly affected, but also the motor vehicle trade. Of course we hope to be able to prevent bankruptcies. But around eight percent of companies with a total of 85,000 employees already have liquidity problems, 18 percent see acute or medium risk of insolvency in the next three months.
The metal and electronics industry was already in recession and undergoing structural change through digitization and e-mobility. Are the problems getting worse now?
This overlaps in parts, but the numbers I just mentioned are clearly due to Corona. Because we saw a drop from one day to the other on the supply chain as well as on the market side. With the closure of the car dealerships, the entire sales network for vehicle construction was withdrawn from the market. And commercial customers are currently not in the mood to order large fleets.
But isn’t there hope that customers will buy a new car in June or July and start a quick recovery?
As long as the uncertainties triggered by the pandemic persist, buyers will hold back. This applies not only to cars, but to overall consumption, which would have to start up. And we’re not just talking about two or three months. The second point is dwindling purchasing power, because there are so many short-time employees. That is why we are so vehemently advocating an increase in short-time work benefits.
They are in close contact with the auto industry and politics. How do you assess the situation there?
Everyone is preparing for the fact that there will be no steep V upwards in growth, but rather that we are dealing with a transverse hockey stick, i.e. a serious demolition and a slow recovery process. It is also clear to everyone that the economy can only get going again in a coordinated European manner. There is no use starting a restart scenario here if Italy and Spain are still in the shutdown. There are thousands of parts we need in the European production network that cannot be replaced within a few days. And we have to think about how we can create incentives to buy after the pandemic.
With an economic stimulus plan?
Yes. I think that an economic stimulus program can help promote qualitative growth and drive the topic of transformation forward with vigor, for example the expansion of the digital infrastructure or the energy and mobility transition.
The federal government has rolled out unprecedented aid to businesses and employees. Are you missing anything else?
The government made a very decisive decision and acted at a breathtaking pace – and that was correct. Some of the improvements are still being made, as is the case with the aid for medium-sized companies. But we also have to be careful that there are no deadweight effects or absurd special requests.
What are you thinking about?
The fact that the economy is rolling out its complete program on tax relief again. Now is not the time to serve particular interests. Industry has sufficient opportunities to secure liquidity – for example through tax deferrals.
They call for an increase in short-time work benefits by employers. This would also remove liquidity from the companies.
Many employees cannot make ends meet if they drop from 100 to 60 percent of their net income at running costs. Unlike in the financial crisis, we often have zero short-time work today. And it affects not only industrial companies, but also the laundries from our organizational area. Payments are made just above the minimum wage. For this reason, employers should pass on at least half of the equally financed social contributions that are reimbursed by the state to the employees. But politics decided otherwise.
Employers argue that the reimbursement of social security contributions will only get you back the costs you previously paid …
The companies have the possibility to defer the social contributions at least until the end of April. At the moment, no company pays in advance if it doesn’t want to.
In Baden-Württemberg, the short-time work allowance is increased to 80 percent every month, in the other tariff areas there is a one-off payment of 350 euros for a hardship fund. Wasn’t it possible with the latest wage agreement?
There was great opposition from employers to adopt the regulation from Baden-Württemberg. However, a number of companies have agreed a higher increase with their works councils. The 350 euros from the hardship fund are roughly enough to reach 80 percent of net income over the next two months for short-time work benefits. If the crisis phase lasts longer, we have a problem. And 40 percent of the companies are not bound by collective agreements or do not have a corresponding company agreement. Employees only get the bare short-time allowance.
Minister of Labor Hubertus Heil says that it will not be possible to save every job. Do we also need improvements to unemployment benefits?
Due to the crisis, we are currently dealing with a job market in which hardly any new jobs are found. This affects, for example, the 40,000 employees from the wind power industry who became unemployed last year. Politicians should therefore at least temporarily extend the duration of unemployment benefits beyond twelve months.
The Corona help means there are huge sums in the fire – in Germany and Europe. Are you afraid of a new debt crisis?
The federal government has approved a supplementary budget of 350 billion euros, which is a third of the total budget. But if you repay the sum over 30 years at the usual interest rates, that’s twelve Billion euros annually. By maintaining the soli for upper incomes, the tax authorities will earn ten to eleven billion euros annually. Only as a relation. It is true that Olaf Scholz is now in full swing. The protective shield for employees and companies is an act of solidarity, but we can do it.
Other EU countries are also putting together huge aid packages. Do we need corona bonds?
Yes. We shouldn’t make the 2009/10 mistake again. At that time we experienced a rebound effect because then in 2011/12 there was speculation against the countries that were not yet stabilized. Therefore the lesson from the crisis at the time must be to put the protective shield in good time. And I think that Euro or Corona bonds are the right answer.
What do you say about the fact that Germany, as the leading engineering nation, is apparently unable to quickly build a production line for simple respiratory masks?
This does not happen overnight, but rather takes two or three months for fully automated production lines. And it’s not enough with the machine alone, you also need the raw materials. But the issue of mask and protective clothing production is far too late and has not been adequately addressed to date. Machines from China are now being brought to Europe, and individual industrial companies are converting their production. But it’s all too uncoordinated.
You mentioned China. Could the country where the pandemic started to emerge as a winner from the crisis because its production is back on track?
The fact is that the Chinese economy is growing again, the Chinese factories of German car manufacturers are at least producing again, we are supplying parts, the mechanical engineering industry is looking forward to orders from China. In this respect, we have the same situation as in 2009. At that time it was China that pulled us out of the crisis together with domestic demand. At the moment, China is the only export market where we have train.
While the metalworker or the band worker at VW or Daimler used to keep the economy going, today it is the nurse or cashier. Should the nurse soon earn more, the metal worker less?
First of all, I welcome the fact that there is a new debate about the value of work. Because just clapping from the balcony doesn’t help colleagues. But I warn against playing individual groups of employees against each other. With its added value, taxes and duties, the metalworker makes a decisive contribution to the performance of the welfare state and the To secure healthcare. And this has to be financed better if the fees there are to rise appropriately.
They had started the collective bargaining round of the metal and electrical industry, which had now been concluded, with the aim of finding answers to the structural change. What happens now when the crisis collective agreement expires at the end of the year?
What we will do at the end of the year, maybe I’ll deal with that in October. But we have agreed with employers to continue discussions on future collective agreements. The dynamics of digitization and structural change will tend to accelerate and the world of work will be different after Corona than before.
Are you pleased that you have an exceptional day off on May 1st? Large May rallies are canceled.
We will design the May rallies virtually. Another new experience for all of us.
More: Employers and trade unions in the metal and electronics industry have demonstrated their ability to act in the corona crisis. That should continue permanently, says Arndt Kirchhoff.