German Paper: Payola At Opel

Bertel Schmitt
by Bertel Schmitt

Sex and money are known as the world’s biggest motivators. Volkswagen used sex to make its shop stewards cooperative. This ended in a huge scandal. Opel is using money instead. “The system is the same as formerly at Volkswagen – only without sex,” writes Germany’s Frankfurter Allgemeine Zeitung in a long article about “illegal bonus payments” to members of Opel’s works council.

Under German law, the works council, consisting of elected representatives of the employees, is a powerful institution. Without its cooperation, a company grinds to a halt. The works council has to agree to hirings and firings. In a large company, half of the board members are representatives of the employees. At Opel, Über-shop steward Klaus Franz is the deputy chairman of the supervisory board. Great is the temptation to make the works council pliant.

According to the Frankfurter Allgemeine Zeitung, works council member receive up to $2,000 monthly, in addition to their normal pay. The “normal” pay of a shop steward can rise quickly. It also can drop after a failed re-election. The bonus payment for Klaus Franz is a secret.

Opel says the system is kosher. Law professors cited by the FAZ call it a “blatant violation of the law which requires that membership in the works council must be unsalaried.” If the payments are illegal, then they may not be booked as business expenses. The matter could also have tax implications.

“Commonly, what we have here would be called bribes,” says the FAZ.

Usually, these revelations are not the works of enterprising journalists. When the VW scandal broke, it was two months before a general election. The incumbent was Gerhard Schröder, a social democrat. He had been premier of Lower Saxony before, had been a member of VW’s supervisory board. The social democrats and the unions traditionally are close. Hurt the unions, hurt the social democrats. A few days after the first bits of the scandal became known, the New York Times wrote: “VW affair may hurt Schröder at the polls.” The unions were discredited, the social democrats lost heavily.

The current Merkel government is still holding a grudge against GM which had reneged on the Opel deal. The next elections won’t be until 2013.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href=""> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href=""> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Buickman Buickman on Oct 17, 2011

    in the US we call it VEBA administration, fund management fees paid in exchange for plant closings and second tier wages.

  • Zackman Zackman on Oct 17, 2011

    Like it or not, things like this are a way of life in many areas - it's how folks survivie and how things get done. Whether "illegal" or not, it doesn't matter. Sometimes "laws" are on the books and looks good, but the reality is very different. Business ethics are often nice for appearances sake, but again, that area under the conference table can be very large and dark with lots of space to move around in!

    • Herm Herm on Oct 17, 2011

      this flexibility probably accounts for a large portion of German prosperity in auto manufacturing and their unions.. its grease on the skids. We could use some of this bribery to improve the economic conditions in the US.

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