17 May 2012

Why did GM pick Ellesmere Port over Germany?

As GM chooses Ellesmere Port for the production of the new Astra, Channel 4 News looks at the differences between British and German workers’ rights and pay to find out why Britain closed the deal.

General Motors announced today that the next generation of Astras will be manufactured at its factory in Ellesmere Port in northwest England, leaving its German plant in Bochum at risk of closure.

Workers at Ellesmere Port agreed to a new labour deal which swung the car giant’s decision in favour of Britain. So what are the key differences between British workers’ employment rights and benefits, and those of their German counterparts?

David Bailey, Professor of International Business Strategy and Economics at the University of Coventry, told Channel 4 News that General motors had played a game of “divide and rule”. He said: “It’s classic for them: you announce you’re going to cut capacity, you don’t say where – and then all parties compete in a race to be the chosen plant.”

“The union and workers have pulled out all the stops to make Ellesmere Port as efficient as possible to keep costs down. They’ve saved the day at the plant.”

Robin Chater, Secretary General of the Federation of European Employers told Channel 4 News that the decision was down to a combination of factors: differences in pay, employment protection, and the changing perception of UK car manufacturing.


Pay for skilled manual workers is higher in Germany than in Britain. According to statistics from the Federation of European Employers, the median pay for skilled manual workers in Germany is 17.99 euros per hour. The equivalent pay for a UK skilled manual worker is 14.42 euros.

While German car manufacturing unions recently took workers on strike in the hope of a pay increase, the union behind the Ellesmere Port deal, Unite, has agreed to a two year pay freeze.

In addition, employer social security contributions are significantly different: while UK employers contribute 13.8 per cent of the workers’ salary, the equivalent in Germany is 20.84 per cent.


It isn’t just pay that clinches the deal; there are big differences in the rules on dismissal. In April, UK rules changed so that an employee can only claim unfair dismissal if they have been working for the same employer for two years or more. The equivalent in Germany is six months.

Mass dismissal is also more problematic for employers in Germany than in Britain: if an employer wishes to dismiss more than 30 people in any given month, they must provide a social plan which has to be approved by government. In the UK the process is more straightforward and no government approval is required.

German working hours are more rigid. In the UK working patterns are more flexible and amenable to shift patterns, as the working time directive allows workers to opt-out of standard working hours with the 48-hour rule. In Germany, however, co-determination, under section 87 of the labour code, means work councils can stop production if they suspect there is any infringement on agreed working conditions – for example a change in daily hours, breaks, or leave arrangements.

While annual leave is broadly the same in both countries (although Germany does have more bank holidays than Britain), part of the Ellesmere Port deal involved renegotiating the set holiday closures which traditionally see British plants shut down production for a period during the summer. The agreement keeps the plant active 51 weeks a year with one week off for Christmas.


Mr Chater argues that the background to General Motors’ decision is a general improvement in international attitudes to the UK as a manufacturing base.

General Motors may have been influenced by other car manufacturers, like Honda and Nissan, who are developing their production plants in the UK.

“For a long time Germany set the standards, and Japan copied and made things cheaper. But Japan put their prices up, and Germany over-engineered, and now people are looking at functionality and cost effectiveness in production,” he said.

“The general reputation of car manufacturing in the UK is improving – changes in the law are making it more attractive.”

He added: “It is one of the ironies of life that the more job security, the less attractive countries are to people who generate jobs.”

A spokesperson for Unite, however, told Channel 4 News that despite Germany’s workplace rights, the country has the strongest growth in Europe: “This nails the myth that some sections of the Conservative Party here are given to saying, which is that to boost growth you need to cut back on workers’ rights.”

He said: “We don’t view weaker labour laws [like unfair dismissal] as being central to General Motors’ decision. Our understanding is it was made one a business case and what they saw as being best for the company.”

Gearing up the supply chain

Another important factor, Professor Bailey argues, is government support: for years General Motors has shifted the sourcing of components out of the UK to keep costs down. The fact the government is willing to help the company source more locally, by helping the supply chain gear up to increased demand, further enhanced the UK’s overall attractiveness.

A spokesperson for EEF, the manufacturers’ organisation, told Channel 4 News: “Over the last two decades we have seen a significant hollowing out of the UK’s supply base and the government is quite right to address it’s re-building as a priority.

“However, that which remains is world class, especially into key sectors such as Aerospace and Automotive and has played a key role in attracting inward investment into those sectors.

“We are also seeing an increasingly close collaboration up and down the supply chain between the larger companies and their suppliers, a key factor in boosting innovation and product development.”