The Cases of Audi, Mercedes and Volkswagen Reconsidered : Firm-Level Employment Pacts in International Companies - An Explanatory Model for Concession Bargaining

In the last years many firms in Germany bring off agreements with their workforce (their works councils, respectively), in which they agree on a reduction of (hourly) wages. With the announcement to relocate parts of the production abroad, due to lower wage rates, managers initiate renegotiations over wage and employment, forcing works councils and unions to accept lower wages to accept lower wages to save and secure the employment at home.Taking the quot;employment (protection) pactsquot; in the automobile industry of Audi, Mercedes and VW as examples we will analyze the conditions and results of such agreements. As we will see, the reduction of hourly wages can be combined with an extension or reduction of working hours. The framework for the analysis is a model oriented to McDonald and Solow's model of efficient bargaining. It is shown under which constellations certain wage-working hours combinations occur and in how far economic framework conditions - especially the conditions of relocation - influence the outcome of bargaining