ZF Friedrichshafen

A Too-Greasy Wheel

Streik
Members of IG Metall, Germany's biggest trade union, are asking for higher pay.
  • Why it matters

    Why it matters

    If the dispute at the works council at ZF Friedrichshafen continues, the focus may be more on the channeling of funding and struggles over power at the expense of company issues.

  • Facts

    Facts

    • Since its takeover of U.S. competitor TRW in May, ZF is now the world’s third-largest car parts supplier.
    • In the last three years, ZF paid a number of invoices for seminars and printed materials that benefited the IG Metall labor union.
    • ZF Works Council Chairman Achim Dietrich-Stephan rose through the ranks to become one of the most powerful officials in the company.
  • Audio

    Audio

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Achim Dietrich-Stephan, the head of the works council at ZF in Friedrichshafen, is a powerful, influential person at the car parts maker in southwestern Germany. And that’s the problem.

Mr. Dietrich-Stephan, also a member of the IG Metall labor union, is being accusing of exerting influence to benefit the labor union, at the expense of the company. He has alienated some members within the works council, who have petitioned a court to examine his actions, in particular, the funding of a labor union event last year.

That event involved a meeting at a hotel on Lake Constance of union representatives, all members of the works council of ZF, who had come together for discussions with works council head, Mr. Dietrich-Stephan, and IG Metall official Enzo Savarino.

The topic of the meeting was the works council election in two months’ time. There were plenty of questions: Who would be in charge of information booths? Who would handle promotional gifts? With which issues did the works council members intend to attract votes?

The IG Metall members had not spared any expense for their campaign. In the end, the seminar cost €17,682.07, about $20,000. Their ambitious goal was to secure all available mandates on the works council for the powerful industrial union.

The seminar at the Hotel Krone isn't the only case of its kind. There have been other incidents in which there is reason to suspect that sums paid by the employer had nothing to do with the activities of the works council, but instead merely benefited IG Metall.

The goal was legitimate, but were the methods?

ZF, not IG Metall, paid the bill for the campaign preparations in Schnetzenhausen. Mr. Dietrich-Stephan had sold the conference to his employer as a training seminar for works council members. Under Germany’s industrial relations law, ZF is required to pay for such seminars, but not for the campaigns of individual tickets.

The seminar at the Hotel Krone isn’t the only case of its kind. There have been other incidents in which sums paid by the employer allegedly had nothing to do with the activities of the works council, but instead merely benefited IG Metall.

According to investigations conducted by Handelsblatt and the Schwäbische Zeitung newspaper,  ZF paid about a dozen invoices over the last three years for events that may have been campaign seminars attended by IG Metall works council members, as well as for posters the union used to thank its voters and even the layout of the IG Metall newspaper. The costs are estimated to be as high as €140,000.

The invoices tell a story about Mr. Dietrich-Stephan, 47, who is known to play hardball and fight on his and IG Metall’s behalf. It’s the story of a labor representative for whom personal power and the influence of his union might seem to have become more important than the future of his company – and who is even suspected of not shying away from using illegal methods.

For IG Metall, ZF is not just any company. The group, with €32 billion or $36 billion in sales since its takeover of U.S. competitor TRW in May, is now one of the world’s third largest car parts suppliers, after Continental  with €35 billion in sales and Bosch with €33 billion. Losing influence at ZF would be a heavy blow to self-confident IG Metall.

Despite his powerful position, Mr. Dietrich-Stephan doesn’t have free rein. Since the 2014 works council election, he must now grapple with two other labor groups, the Christian Metalworkers’ Union and an independent ticket called called We ZF Employees. The latter promptly deprived IG Metall, which had run unchallenged for decades, of six seats in the 2014 election, even though it was running for the first time. It was more than a bitter defeat for IG Metall, which sees itself as the only legitimate representative of labor in the metal industry.

The problem Mr. Dietrich-Stephan is apparently causing ZF go well beyond IG Metall sensitivities and labor union bills the company should not have paid. They may also include labor costs and working hours at the Friedrichshafen plant and, hence, the competitiveness of ZF’s head office.

Achim Dietrich Stephan Source
Works council chief Achim Dietrich-Stephan: did he abuse his position of power? Source: Handelsblatt

 

Two years ago, talks over flexible working hour models at the Friedrichshafen plant ended in failure. The works council ended the negotiations only a few months before the works council election. Mr. Dietrich-Stephan was the chief negotiator for the labor side.

Friedrichshafen is already the group’s most expensive plant. Wages there are about 10 percent higher than those at other German plants, a clear competitive disadvantage, given that labor costs make up an average of 23 percent of the cost of ZF products. Another problem is that truck maker MAN has decided to stop buying transmissions from ZF for two of its models starting in 2017 – transmissions that ZF makes at its Friedrichshafen plant.

ZF plants in Saarbrücken and Passau, where the company introduced flexible working-hour models a few years ago, are still expensive compared to its other plants worldwide, but much more competitive than Friedrichshafen, its largest in Germany with about 9,000 employees.

Mr. Dietrich-Stephan has gained influence as talks between management and the works council at ZF have become more difficult. He began his career at the company in a training program for industrial mechanics and in 2012 became chairman of the works council at the Friedrichshafen plant. To years later, in May 2014, he was elected general works council chairman of ZF Friedrichshafen AG.

A former senior executive, who often interacted with Mr. Dietrich-Stephan, described him as a “power-conscious” man who takes advantage of everything the industrial relations law has to offer. “This means that if you don’t get what you want on the left side, you shut things down on the right side until it hurts the company,” he said.

According to an insider, Mr. Dietrich-Stephan is "only interested in his own power."

As a labor representative, Mr. Dietrich-Stephan is also a member of the supervisory board of the global corporation and, according to supervisory board insiders, would like to become deputy chairman of the board. Mr. Dietrich-Stephan declined to comment.

An opposition group within the works council has formed against the omnipotent Mr. Dietrich-Stephan. The We ZF’ler faction is also critical of his behavior. “IG Metall opposed us from the beginning, which was understandable,” said Barbara Rentsch, a 56-year-old designer and members of the works council, who resigned from the IG Metall ticket in 2012 and founded the independent ticket. “But it crosses a line when the head of the works council is so power-hungry and determined to fight opposing tickets that he has to resort to these methods.”

Her group has requested a legal opinion to determine whether the head of the ZF works council is liable to prosecution for fraud, as a result of illegitimate invoices that were approved and charged to ZF. A labor court in the southern city of Ulm has been petitioned to order the company to pay the costs of the legal opinion.

ZF itself has been aware of the accusations against Mr. Dietrich-Stephan, as well as the seminars, brochures and union newspapers paid for by the company. The manufacturer subsequently conducted a corporate audit, which it said did not fully confirm the allegations. “If new information should lead to a different assessment, ZF would of course draw the necessary consequences,” a company spokesperson said.

The audit was requested by the Wir ZF’ler faction, which asked for help, claiming it was being “regularly obstructed in works council activities” by the IG Metall ticket.

Although the auditing department completed its report, it neither questioned the Wir ZF’ler group about the matters in question, nor did it mention the legal opinion in its report.

When asked about the invoices for campaign posters and union newspapers that may have been wrongly paid, Mr. Dietrich-Stephan cited the corporate audit report, which essentially concluded there were no irregularities. “Our publications are not campaign advertising for a specific union or a specific works council ticket, but instead report on the work of the works council,” he told Handelsblatt and Schwäbische Zeitung.

Mr. Dietrich-Stephan revealed his true view of his role as works council chairman at the car parts suppliers’ company meeting in the summer of 2013, in remarks to the assembled employees. As the host of the meeting, he introduced his predecessor Hans Kirchgässner and Friedrichshafen Mayor Andreas Brand, saying: “I wish to welcome the two most powerful men in the city.”

It’s a position he now appears to be claiming for himself, apparently by all available means.

 

Benjamin Wagener covers companies and markets for Handelsblatt in Düsseldorf. To contact the author: wagener@handelsblatt.com

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