To Avoid Strike That Could Impact Model 3, Tesla Raises Worker Wages In Germany

7 months ago by Eric Loveday 44

Tesla Emblem On Model S

Fear of a potential strike that could possibly cripple Model 3 production, Tesla has reacted by raising worker wages in Germany.

A strike this close to the start of production of the Tesla Model 3 could be catastrophic, so to reduce the risk of a strike, Tesla has raised wages at the recently acquired Grohman Engineering, which was later formed into Tesla Advanced Automation Germany.

Tesla Model 3

Tesla Model 3

Word of a potential strike surfaced one week ago. These were the reasons put forth by the local labor boss:

  • The 660 Tesla Grohmann employees are paid up to 30% below union rate
  • Tesla cancelled all non-Tesla order at Grohman, which is fueling fears over job security
  • Grohman’s founder has left the company within reason

At the time, Tesla had offered to increase employee pay by some 150 euro per month and to increase compensation further through a TSLA stock program.

There’s been a lot happening at Grohmann Engineering in the last few days. According to Reuters:

“Klaus Grohmann, former head of Grohmann Engineering, a maker of automated manufacturing systems, has left the company…”

Additionally, “Tesla has given job guarantees and pay rises to the firm’s 700 employees…”

But Tesla isn’t out of the strike waters just yet. Reuters states:

Tesla workers in Germany at Grohmann to get a pay bump

“The union said job guarantees and the offer of employee stock options have significantly reduced the prospect of a strike. Still, IG Metall is demanding a collective wage bargaining contract and improved pay. The union has complained that pay at Grohmann is 25 to 30 percent below an industry-wide collective agreement for the metalworker electric industry.”

“The head of Grohmann’s works council, Uwe Herzig, said Tesla had offered another 1,000 euro ($1,089) one-off payment after Easter, on top of job guarantees, pay rises and stock options.”

“In March Tesla offered employees a pay raise of 150 euros a month. This was followed up just before Easter with an offer of 10,000 euros in stock options for four years, and a pledge to guarantee jobs for five years, Herzig said.”

It truly seems as though Tesla is in a hard place here. If Grohmann employees were to strike, Model 3 production would almost certainly be impacted. In what way? We’re not sure, but from the various offers/wage increases laid out above, it seems Tesla is desperate to prevent a strike no matter what the cost. This would only be the case if something major were at stake, like say start of production of the Model 3.

Update:  More on Klaus Grohmann’s departure from his company

Street Insider says the former boss didn’t leave on great terms, disagreeing with Tesla on the decision to abandon other clients.

“Grohmann disagreed with Musk’s demands to focus management attention on Tesla projects to the detriment of Grohmann Engineering’s legacy clients, which included Tesla’s direct German-based rivals Daimler and BMW , two sources familiar with the matter said.

“I definitely did not depart because I had lost interest in working,” Grohmann said, without elaborating.

Street Insider did get in touch with a Tesla spokesman about Grohmann’s departure::

“Part of Mr Grohmann’s decision to work with Tesla was to prepare for his retirement and leave the company in capable hands for the future. Given the change in focus to Tesla projects, we mutually decided that it was the right time for the next generation of management to lead.”

Source: Reuters, Street Insider, Hat tip to Riff Raff!

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44 responses to "To Avoid Strike That Could Impact Model 3, Tesla Raises Worker Wages In Germany"

  1. Martin says:

    I wonder, how big is the agreed industry wide salary. I used to work for 3,5 euro per work hour as electrician in the Czech Republic. I should have had worked in Germany instead. 😀

    1. Omicron says:

      The thing is, everything costs more in Germany too! Unless you’re willing to live in the distant hinterlands, we have rent prices of around €13/month per square meter right now. That’s before heat, water and electricity, I might add, and does not include such luxuries as parking space either! A tiny 50m² apartment in a mediocre area can run you over €900/month all inclusive. Add food, clothes, and various car payments, even a €2000/month after taxes wage evaporates quickly that way… and with tax rates exceeding 40%, you’re looking at €21/hour just to get to that mark.

      I bet housing cost you quite a bit less while you were working for €3.50/hour… 😛

      1. Volodymyr says:

        Life is cheap in Germany, I should move there from NYC 🙂

      2. Mo says:

        They never say what was the rate at the factory to start with? They said they’re getting paid 30% less than what salary?

        1. Mr. M says:

          Probably compared to the wages correlated to IG Metall. (See ERA table, Region Pfalz) https://www.igmetall.de/metall-und-elektro-monatsentgelte-907.htm

          1. Mr. M says:

            Between 2.400-5.000€ before taxes/month. Around 60% of that afterwards.

            Basic technican ~ 2.800€
            Software ingeneer ~ 4.800€

      3. randomhuman says:

        You just have to live in the more suburban areas and not directly in the city. Then it is relatively cheap. There are also enough buses or trams in cities. You don’t need a car because traffic is already heavy af. You can even get that 50m2 apartment for 500€ if you live more outside of the city. Just searched for a nice flat in Lübeck. You wanna live in a 62m2 apartment for 465€. Go for it. It’s cheap if you make the right choices. 😉

        1. Mr. M says:

          Yeah live in Lübeck, travel 600km to work. Great idea, not.

          1. randomhuman says:

            Yea nobody said this is about Munich. You don’t have to work or live there…Of course it is ******* expensive there. But there’re many other nice regions/cities in Germany where you can work.

        2. Mr. M says:

          If you live close (<50km) to Munich, Frankfurt or Stuttgart you wont find cheaper living than 10€/m².

  2. Joel E says:

    They are taking advantage of a new employer. They hadn’t struck on the former. Raising their salary is a good move if they are all worth it. And if they feed the dreadnought, all will be fine.

  3. bailey says:

    Tesla should give them what they want (for now) as they are basically taking Tesla “Hostage” knowing that they have no choice at this time of the Model 3 production.

    Then Tesla should secretly look for another part manufacturer and when fully ramped up, they should FIRE EVERYONE there and CLOSE the company.

    If a company wants to play dirty, Tesla can play too.

    “Unions, a scourge on today’s society”

    1. Kdawg says:

      Sounds like they will run into the same issues elsewhere, if the industry average is 30% higher than what they pay now. Unless you are OK w/them going to China?

      1. floydboy says:

        Were they at 30% below industry average while working for Grohmann? Were they upset at Grohmann for paying them that low?

      2. Pushmi-Pullyu says:

        No, it’s just the industry average in Germany, which currently has a very strong economy; I think it’s easily the strongest in the European Union, if I understand what I’ve heard on the news recently.

        I rather think if the factory was moved to a country where unemployment is high, let’s say Spain or Greece, then Tesla could pay far lower wages. Of course, they also wouldn’t find such a readily available pool of skilled workers.

        I’m all for collective bargaining on the local level (but not with huge national unions such as AFL-CIO, the Teamsters, or UAW), but if the article is giving a balanced picture, then this seems to be a case of labor (unionized or not) practicing extortion. Tesla has offered a better deal than they were getting under the previous employer, yet the workers seem to be saying “No, you have to give in to all our demands, not just some of them!”

        When there are two sides to a story, there is usually a more reasonable, more objective middle ground. Not always, but usually. Here it seems the workers are not willing to agree to that more reasonable middle ground.

        * * * * *

        I reject both the attitude that unions are the scum of the earth and the attitude that utopia would result if only everyone would agree to all union demands.

        Everything in moderation, including moderation. — Oscar Wilde

    2. Hauer says:

      Tesla IS the company!

  4. artur says:

    agreed with bailey. cut them loose in due time.

  5. floodzone says:

    They are not a part manufacturer.They manufacture robots that manufacture parts.not to so easily replaced and price.less if your the best

    1. Pushmi-Pullyu says:

      Okay, but the result is the same. They make a critical system which Model 3 manufacturing could not do without. The workers at the factory are apparently quite aware that they have Tesla over a barrel, and are using their bargaining position for leverage, or extortion, depending on how you look at it.

      If the workers’ salaries are really some 25-30% below industry norms for Germany, then it certainly seems the workers have a good claim to get raises. But if this article is painting an impartial portrait of the situation, then Tesla has made a reasonable offer, yet the workers have refused, apparently because they think they have Tesla “by the short hairs”.

      Tesla would be well advised to develop a second source for these robotic arms, and do that as soon as possible, so that the one source is no longer able to bargain from the position of a monopoly.

      Firing all the workers involved if and when Tesla develops an alternative source would be an emotional reaction. Making your business plans on the basis of getting revenge is the mark of a fool; getting a reputation for being vindictive is not the mark of a good businessman. That is one personality flaw that Elon Musk does not have, thank goodness!

      Living well is the best revenge. — George Herbert

  6. ffbj says:

    Is it Tesla’s fault that they have been underpaid for years? No, bu they have to deal with it. I think a phase in of raising wages, geared to performance, would be the right way to go.

    As far as the contracts go why not just fill them, and move on from there? Tesla came in a bit heavy-handed, so they need to put on a velvet glove, but retain the iron fist.

  7. Hi there
    I follow Inside Evs with great interest. Only one thing makes me Wonder – why so many grammar mistakes in many of the articles??

    Even I, as a Danish Citizen, can spot them. Here is a typical expample from this article:

    There’s were the reason put forth by the local labor boss:

    1. ffbj says:

      They are usually very good about fixing grammatical errors, once they have been pointed out.
      It’s just part of the way things are.

    2. Eric Loveday says:

      Fixed. Thanks for the heads up!

    3. Pushmi-Pullyu says:

      “…why so many grammar mistakes in many of the articles??”

      Pushy’s first head says:

      We readers do have a choice:

      We can choose to visit other EV-related websites where more attention is paid to grammar and spelling, but there is less real analysis and insight into the electric vehicle and automobile industries…

      …or we can keep reading InsideEVs, where the staff pays much more attention to getting us real news (along with a good dose of entertaining fluff) than they do to worrying about spelling and grammar.

      * * * *

      Pushy’s other head (aka the Grammar Nazi) says:

      I think articles would be far more readable and would get more attention across the Internet if some standards of spelling and grammar were maintained.

      On that basis, I do wish InsideEVs would hire one or two copy editors to clean up the articles before publication.

  8. Ocean Railroader says:

    In terms of the workers getting raises to match what every other car maker is paying that sounds fair and it doesn’t sound like a insane out of bounds request to simply match the pay and benefits that everyone else is paying.

    I’m glad the workers won this battle to avoid wages from sinking. In that if Tesla pays workers 30% less then everyone else in town will try to follow them down hill.

    So I’m glad the workers and Tesla talked to one another without a major battle.

    1. TomArt says:

      Exactly. That’s why we need unions – to prevent the race to the bottom.

    2. floydboy says:

      Unfortunately this looks like a shakedown. Tesla wasn’t lowering wages, the pay was exactly the same as their former employer. I know of no reports stating that they were unhappy with what they were being paid by Grohmann. It appears they knew Tesla is ‘up against it’, so took advantage of the opportunity.

      I wonder if American workers will ask for a consumerate matching(currency-wise) wage.

  9. Rick S says:

    So they didn’t have a problem with their wages until Tesla bought them? I don’t think anyone should be under paid, but if you aren’t happy with job security and a reasonable offer to bring you up to the norm than maybe you should have left your job to begin with. If Tesla fails they will be signing their own fate and no one wins.

  10. RJKing says:

    “Klaus Grohmann, former head of Grohmann Engineering, a maker of automated manufacturing systems, has left the company…”

    Not cool, even if he disagreed with the new regime, he could have at least stuck around as a figurehead during the transition.

    1. Four Electrics says:

      Musk fired him. This explains much of the new employee angst.

      1. AlphaEdge says:

        Klaus Gerhard Grohmann is 79!!!

        I think Elon did him a favor.

        Klaus objected to Elon wanting Grohmann Engineering from dropping their current clients which are Daimler and BMW. Direct competitors to Tesla. I don’t blame Elon for doing that, as I would have done the same, and I also don’t blame Klaus for objecting, as it was loyalty to his former clients that got his where he is today.

        What did Klaus expect Elon to do? If he thought about it, he should never have sold the company, if loyalty to his clients was that important to him.

  11. (⌐■_■) Trollnonymous says:

    Unions are a Cancer that will eventually kill it’s host.

    I say move the IP and slowly migrate all builds back to the US in a right to work state.

    1. TomArt says:

      I think you meant “capitalism”. Unions prevent a race to the bottom, while capitalism encourages a race to the bottom.

      1. James says:

        +1

        Also, right to work only means you don’t HAVE to join the union to work there, nothing else.

      2. Murrysville EV says:

        What’s your definition of ‘race to the bottom’?

        Because, in truth, most of us want that. Nobody wants to pay more for a product, but we also want just enough quality – not gold plating.

        Unions haven’t demonstrated an ability to reduce costs or improve quality, so there is no guarantee that ‘union-built’ means it’s better.

  12. unlucky says:

    Making the UAW’s case for them. Are paid less than others and have a union? Get a raise. Are paid less than others and don’t have a union? Tesla fights you in the press.

    I’m not even a pro-union guy but the UAW has gained a big talking point.

  13. DangerHV says:

    Tesla should increase their prices by $5,000 per car in Germany to cover the costs. Starting now.

  14. SJC says:

    This is why Germany has a strong economy, their works make a good salary. Even Henry Ford knew this with a 3rd grade education.

    1. Anti-Lord Kelvin says:

      Good point, but the question still the same: why they had a wage 30% under the average wage in this industry before Tesla arrives? Honestly, Tesla was take in hostage and the German IN Metals Union plaid double game here by supposedly supporting the workers, but at the same time, playing the dirty game for the sake of other German car makers who would love to see Tesla failed…
      One thing Elon had learn for sure with this dirty union game: NO European Gigafactory for Germany!

  15. Mister G says:

    Smart move Elon.

  16. Pushmi-Pullyu says:

    This is just one of the problems with using single-sourced parts or sub-assemblies for automobiles. When you’ve got just one source for critical components for the car, then the vendor essentially has you over a barrel if it threatens to end production or sharply raise prices.

    Here’s hoping Tesla develops a second source for these parts ASAP. I realize, of course, that in this case ASAP means only after production is already underway. In the short term, I guess Tesla doesn’t have any choice but to knuckle under to this pressure, which from the description here seems to me (just my opinion) to step over the line into extortion.

  17. bogdan says:

    It’s not Tesla’s fault that the wages are 30% too low.
    Mr. Grohmann is the one responsible for the situation. Blackmailing Tesla is also not the best strategy. Tesla could take revenge sometime in the future and close the company.
    Why did the guy sell the company to Tesla anyway? Now he’s gone!