Press Releases

Labor law reforms must not put the brakes on development service providers in Germany

Berlin/Munich, 05 June 2015

New sector study from Berylls/VDA on development service providers in the automotive value-added chain – jobs at the providers depend on flexible cooperation with manufacturers and system suppliers

Flexible division of labor in the automotive industry is important in production, but above all in research and development (R&D). Over the past 15 years this has been reflected in especially dynamic growth at development service providers. In Germany alone, the development services market for automotive engineering comes to around 3.5 billion euros, and around 50,000 highly qualified employees work in the sector. And the outlook is good. Experts forecast that the development services market in Germany will expand to over 4.5 billion euros by the year 2020 (+30 percent). During the same period, the worldwide value-added in R&D contributed by German technology developers will increase from 8.8 billion euros to 12.3 billion. The division of labor between automotive manufacturers and development firms, combined with continual optimizations, will trigger considerable innovation potential and increases in efficiency. The development service providers are also very attractive to upcoming engineers – Germany is one of the leading countries for development services.

However, the ruling Grand Coalition’s ideas about reforming German labor law are a cause for concern among the development service providers and their customers, who are worried about these opportunities for growth. And that’s not all: the planned measures could seriously disrupt the tried-and-tested, efficient cooperation between automotive manufacturers, suppliers and development service providers. The study entitled “Automotive Entwicklungsdienstleistung – Zukunftsstandort Deutschland” (“Automotive development services – Germany as a location for the future”), which the management consultants Berylls Strategy Advisors prepared in conjunction with the German Association of the Automotive Industry (VDA), emphasizes this critical aspect: “The key points manifested in the coalition agreement concerning changes in the legal conformity of contracts for services make it more difficult to cooperate, and harbor major risks to efficiency and effectiveness for all those involved,” stressed Christian Kleinhans, a Partner at Berylls. He said it would become unattractive to use leased staff, and the planned shorter maximum period for leasing workers would mean that today’s practice will be discontinued because it would no longer fit in with the automotive development cycles of up to four years. The planned changes would increase the costs incurred by the German automotive industry.

“Even now at automotive manufacturers and suppliers, the question is already being asked more often of how cooperation with development service providers in Germany can remain viable,” Kleinhans underscored. Development tasks that were previously awarded to external providers would now tend to disappear at home, or else would be given to international providers. The study assumes that in this case around 5,500 jobs for leased staff could be lost by 2017: “This will make hiring agency workers more or less obsolete.” If criteria for differentiating contracts for services are also written into labor law and codetermination rights are expanded, Kleinhans added, we can expect this to reduce the number of jobs at development service providers by around 8,000.

VDA Managing Director Klaus Bräunig emphasized, “The study describes the portion of automotive value-added contributed by development services and is intended to enhance understanding of research and development cooperation in the key German industry. The politically planned need for regulation should be examined as a matter of urgency.” The study proposes that the legislators should enable the automotive businesses to have individual company agreements adapted to automobile development. Bräunig underscored: “Today’s Works Council Constitution Act created a balance between codetermination rights on the one hand and free enterprise on the other. This balance should not be swept away by new, restrictive labor laws. Entrepreneurial freedom must not be tampered with, especially when it comes to highly qualified and highly paid development work at the German automotive industry’s domestic sites.”

The employers’ association Gesamtmetall also spoke in favor of a responsible form for contracts for services: “In contrast to what the public discussion suggests, there are no good or bad contracts for services, but only legal contracts for services and illegal bogus contracts. Abuse of rights is already prohibited. Carving out certain activities and giving them to external service providers, on the other hand, is not abuse, but is an essential element within a society characterized by division of labor among specialists.”

 

Contacts:

Berylls Strategy Advisors GmbH

Christian Kleinhans

Partner

Maximilianstrasse 34

D-80539 München

Tel.: +49 89 71041040-11

christian.kleinhans@berylls.com

 

Verband der Automobilindustrie e. V. (VDA)

Eckehart Rotter

Head of Press Department

Behrenstrasse 35

D-10117 Berlin

Tel.: +49 30 897842-120

rotter@vda.de

 

Eckehart Rotter
Eckehart Rotter Head of Department Press

Tel: +49 30 897842-120 Fax: +49 30 897842-603
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