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It's very natural for lower income regions to strive towards higher incomes when they are used extensively for production. It's a process many eastern countries

by manmal 9y ago

It's very natural for lower income regions to strive towards higher incomes when they are used extensively for production. It's a process many eastern countries have gone through, and, as a result have become "unsustainable" to host manufacturing sites. I write unsustainable in quotes because those higher wages are certainly not unreasonable; but as long as there is a cheaper option, enterprises will keep moving on. So, Slovakian workers are now realizing their current leverage, they might actually receive raises, but soon auto companies will move on. Auto co shareholders want their company's suppliers to squeeze every last penny out of every part, haggling over 0.5 cent savings is really normal. Source: My father has been working in automotive for last 2 decades (auto parts supplier). They had an unofficial saying "EBIT macht frei", a pun on Nazis' "Arbeit macht frei", meaning that EBIT has to be optimized for at ALL cost. EDIT: Corrected the EBIT pun

dEnigma 9y ago
The actual words on the entrance of Auschwitz were "Arbeit macht frei". So it should probably be "EBIT macht frei"? The meaning is the same of course https://en.wikipedia.org/wiki/Arbeit_macht_frei https://en.wikipedia.org/wiki/Arbeit_macht_frei
- manmal 9y ago
  Yes, I updated my comment a short time before you commented. Not sure why you are downvoted.
charlesdm 9y ago
> So, Slovakian workers are now realizing their current leverage, they might actually receive raises, but soon auto companies will move on. Then they actually have no (sustainable) leverage at all. In the end, the shareholders just matter more to these companies than the employees. They're often the ones signing off on the renumeration of the CEO and the executive team.
- vetinari 9y ago
  >> So, Slovakian workers are now realizing their current leverage, they might actually receive raises, but soon auto companies will move on. > Then they actually have no (sustainable) leverage at all. They kind of have. To go any lower with the wages, the car companies would have go outside of EU - to Serbia or Ukraine, for example. Then, they would be hit by the import duties they themselves lobbied for. So the workers can ask for such increase, that is still a bit below the costs of having it behind EU borders plus duties. The trend of the plant operators is currently exactly the other way: they try to import workers from these cheaper countries. Undocumented, of course.
- sgt101 9y ago
  Which is the result of property laws. Democracies could rebalance this easily.
- matt4077 9y ago
  It's not that easy... Moving a factory isn't free, nor does it happen instantly. And at some point, you're also running out of impoverished countries to move to, especially if you also want them to be politically stable and come with the infrastructure you need. Plus, this being VW, a German company, half of the board seats is held by union representatives, and a significant portion of the rest are held by local politicians (the state is a minority shareholder in VW).
_0ffh 9y ago
I can confirm that manufacturers will haggle over a few cents, or even fractions thereof, for e.g. a sensor in a product that will finally cost thousands of dollars. I suppose they see those cents adding up over hundreds of thousands of prospective sales. Still, it certainly looks kind of petty.
- WalterBright 9y ago
  Consider how much technology you are buying in a car for $15,000. It's astonishing. The only way you could buy such a thing is if the manufacturers relentlessly pushed down costs.
  - KGIII 9y ago
    Curiously, some of us don't mind paying more for products where the folks received fair wages. However, consistent sourcing of those products isn't easy. I'm not sure if it is a niche large enough to be a viable business, however. In some areas, I source as much as I can from local providers - or use my own labor. However, that's probably not realistic for most folks. I'm fortunate enough to have an obscene number of acres and live next to a small family farm.
    - TheSpiceIsLife 9y ago
      A single car has about 30,000 parts[1]. Good luck sourcing those from your local farmer's market, and at a premium. 1. http://www.toyota.co.jp/en/kids/faq/d/01/04/ http://www.toyota.co.jp/en/kids/faq/d/01/04/
      - KGIII 9y ago
        You might have missed some of the words in my comment. I'm well aware that this isn't possible for all things. I'm not entirely sure that it isn't feasible for more things, however.
        TheSpiceIsLife 9y ago
pjmlp 9y ago
Nokia also had a good example a couple of years ago. In 2008 they close a factory plant in Bochum (Germany) to move it to Romania, with tax reductions from the Romanian government. In that year they received the "Company of the Year" award from the Romanian government, many Romanians were of course happy to be given the opportunity for a job, while a anti-Nokia sentiment grew in Germany with the amount of jobs being lost. A few years later (2011) Nokia moved the same factory to Vietnam. http://www.spiegel.de/international/business/factory-closure-german-state-demands-60-million-from-nokia-a-540699.html http://www.spiegel.de/international/business/factory-closure... https://www.ft.com/content/619bc988-ea7a-11e0-b0f5-00144feab49a https://www.ft.com/content/619bc988-ea7a-11e0-b0f5-00144feab... http://www.business-review.eu/news/nokia-and-romanian-trade-unions-agree-on-compensation-packages-for-jucu-employees-12735-1395 http://www.business-review.eu/news/nokia-and-romanian-trade-...

by manmal 9y ago

dEnigma 9y ago

The actual words on the entrance of Auschwitz were "Arbeit macht frei". So it should probably be "EBIT macht frei"? The meaning is the same of course https://en.wikipedia.org/wiki/Arbeit_macht_frei https://en.wikipedia.org/wiki/Arbeit_macht_frei

manmal 9y ago
Yes, I updated my comment a short time before you commented. Not sure why you are downvoted.

charlesdm 9y ago

> So, Slovakian workers are now realizing their current leverage, they might actually receive raises, but soon auto companies will move on. Then they actually have no (sustainable) leverage at all. In the end, the shareholders just matter more to these companies than the employees. They're often the ones signing off on the renumeration of the CEO and the executive team.

vetinari 9y ago
>> So, Slovakian workers are now realizing their current leverage, they might actually receive raises, but soon auto companies will move on. > Then they actually have no (sustainable) leverage at all. They kind of have. To go any lower with the wages, the car companies would have go outside of EU - to Serbia or Ukraine, for example. Then, they would be hit by the import duties they themselves lobbied for. So the workers can ask for such increase, that is still a bit below the costs of having it behind EU borders plus duties. The trend of the plant operators is currently exactly the other way: they try to import workers from these cheaper countries. Undocumented, of course.
sgt101 9y ago
Which is the result of property laws. Democracies could rebalance this easily.
matt4077 9y ago
It's not that easy... Moving a factory isn't free, nor does it happen instantly. And at some point, you're also running out of impoverished countries to move to, especially if you also want them to be politically stable and come with the infrastructure you need. Plus, this being VW, a German company, half of the board seats is held by union representatives, and a significant portion of the rest are held by local politicians (the state is a minority shareholder in VW).

_0ffh 9y ago

I can confirm that manufacturers will haggle over a few cents, or even fractions thereof, for e.g. a sensor in a product that will finally cost thousands of dollars. I suppose they see those cents adding up over hundreds of thousands of prospective sales. Still, it certainly looks kind of petty.

WalterBright 9y ago
Consider how much technology you are buying in a car for $15,000. It's astonishing. The only way you could buy such a thing is if the manufacturers relentlessly pushed down costs.
- KGIII 9y ago
  Curiously, some of us don't mind paying more for products where the folks received fair wages. However, consistent sourcing of those products isn't easy. I'm not sure if it is a niche large enough to be a viable business, however. In some areas, I source as much as I can from local providers - or use my own labor. However, that's probably not realistic for most folks. I'm fortunate enough to have an obscene number of acres and live next to a small family farm.
  - TheSpiceIsLife 9y ago
    A single car has about 30,000 parts[1]. Good luck sourcing those from your local farmer's market, and at a premium. 1. http://www.toyota.co.jp/en/kids/faq/d/01/04/ http://www.toyota.co.jp/en/kids/faq/d/01/04/
    - KGIII 9y ago
      You might have missed some of the words in my comment. I'm well aware that this isn't possible for all things. I'm not entirely sure that it isn't feasible for more things, however.
      - TheSpiceIsLife 9y ago

pjmlp 9y ago

Nokia also had a good example a couple of years ago. In 2008 they close a factory plant in Bochum (Germany) to move it to Romania, with tax reductions from the Romanian government. In that year they received the "Company of the Year" award from the Romanian government, many Romanians were of course happy to be given the opportunity for a job, while a anti-Nokia sentiment grew in Germany with the amount of jobs being lost. A few years later (2011) Nokia moved the same factory to Vietnam. http://www.spiegel.de/international/business/factory-closure-german-state-demands-60-million-from-nokia-a-540699.html http://www.spiegel.de/international/business/factory-closure... https://www.ft.com/content/619bc988-ea7a-11e0-b0f5-00144feab49a https://www.ft.com/content/619bc988-ea7a-11e0-b0f5-00144feab... http://www.business-review.eu/news/nokia-and-romanian-trade-unions-agree-on-compensation-packages-for-jucu-employees-12735-1395 http://www.business-review.eu/news/nokia-and-romanian-trade-...