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The secret of Germany's success

by Jerome a Paris Tue May 15th, 2007 at 11:31:17 AM EST

From an interview with Wendelin Wiedeking, the CEO of Porsche:


His evident fondness for his workers is reflected in other aspects of his business philosophy. "Our business model is only financed by customers. So we have to pay a lot of attention to our customers. When the customer is happy then the worker is happy too and so are the suppliers. Then there should be enough money left for the shareholder. But that is the order of importance," he says.

All of this is part of Mr Wiedeking's insistence that he is not a slave to the capital markets: "The question is: how can society allow capital to make all the rules? I have never understood shareholder value as it leaves so many things out. Shareholders give their money just once, whereas the employees work every day."

(...)

Underlying Mr Wiedeking's philosophy is a fervent belief in the value of credibility. He says his move on VW was "credible" because of his experience in turning round Porsche. Similarly at Porsche he has taken a stance on certain issues - turning down subsidies to build new factories in eastern Germany or refusing to offer incentives to sell cars, for instance - to boost customers' belief in the brand and its image.

"Credibility is the key word. You have to show customers, workers, colleagues that you are going for something not for the short term, not because it is trendy or posh but because it is sustainable and down-to-earth. That is what I've practised and always will."

How quaint. Or maybe not.

promoted by whataboutbob


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Makes a lot of sense. Still odd to hear him talk about Porsche sustainable and down-to-earth, though.
by nanne (zwaerdenmaecker@gmail.com) on Mon May 14th, 2007 at 06:33:29 PM EST
for what i remember, Porshe is the (or one of the few)only company that refuses to give its financial results every 3 months, they want their shareholders to be focus on the long term development instead the usual ultra-short term.
by fredouil (fredouil@gmailgmailgmail.com) on Mon May 14th, 2007 at 11:47:55 PM EST
Unfortunately, since the nineties, Porsche's business philosophy makes them an oddball in Germany, not the norm, at least among major companies. Copying Anglo-Saxon mores in the most naive and superficial ways, including speaking a gibberish of mixed English/German words ('Neudeutsch') has become the norm among not just managers. (Just last week, I was at a presentation by a Bavarian software company, and even the ex-Yugo guy who brought them here ironised about the language of the presentation.)

More on Germany's success:

NETZEITUNG:

Unterschicht hat nichts vom AufschwungLower class has nothing from the upswing
Eine wachsende Unterschicht bleibt nach Ansicht des Jenaer Sozialwissenschaftlers Roland Merten vor allem im Osten vom derzeitigen wirtschaftlichen Aufschwung ausgenommen. «Vom Aufschwung profitieren nur die Begüterten und Qualifizierten, nicht aber die schlechter Qualifizierten und Empfänger von Arbeitslosengeld II», sagte der Sozialpädagoge von der Universität Jena. «Um das Ausmaß der Misere zu begreifen, muss man sich deutlich machen, dass das so genannte abgehängte Prekariat in den alten Ländern vier Prozent, in den neuen aber ein Viertel der Bevölkerung umfasst.»According to the view of social scientist Roland Merten from Jena, a growing lower class, above all in the East, is left out of the economic upswing. "Of the upswing, only the wealthy and the [highly] qualified profit, but not the lower-qualified and the receivers of Jobless Benefit II [the reduced successor to both long-term jobless and social benefits introduced by the infamous Harz IV reform package]", said the social educator of the University Jena. "To comprehend the scale of poverty, one must intimate that the so-called left-behind 'precariat' [neologism, from precarious, analogously to proletariat] is four percent in the old [Western] states, but one fourth of the population in the new [Eastern] ones."


*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue May 15th, 2007 at 02:56:22 AM EST
My prediction is that economic activity in large parts of the East is "already extinct, we humans just don't know it yet." I've already seen this pattern in large parts of Wales and Northern England. When traditional industries die off the patterns of our current economy are predicated on people moving. Existing communities (often left composed only of the elderly and some unskilled younger workers) wither as there is much reduced economic demand for people these days...
by Metatone (metatone [a|t] gmail (dot) com) on Tue May 15th, 2007 at 03:44:57 AM EST
[ Parent ]
If I had the opportunity, I would set up a system whereby the Eastern Germans would be hired to tutor the immigrants in all of Germany in German language skills either by telephone or by computer in return for higher living assistance.  

As native-speaking Germans they would have a natural advantage but might require some training.

German society as a whole would improve its productivity and better integrate the "left behind" groups into society.

It's a plan that I would spend more time developing maybe to propose as some sort of subsidised business plan but I would require some help.

by zoe on Tue May 15th, 2007 at 07:51:34 AM EST
[ Parent ]
A little more info may be required for some.

In Germany, there is a thriving tutoring business for people's children as children are still separated rather early into various streams for either university or  trade school.

Much of this is based on how well the child speaks German.  

by zoe on Tue May 15th, 2007 at 07:54:39 AM EST
[ Parent ]
So, anybody interested in helping me research this a bit better?
by zoe on Tue May 15th, 2007 at 08:21:27 AM EST
[ Parent ]
these teachers could also be set up to be used by the Goethe Institute for example, as a resource to teach German worldwide.
by zoe on Tue May 15th, 2007 at 08:25:17 AM EST
[ Parent ]
I know that some people do hire tutors to learn online but does anyone know if this is an efficient way of learning?  Can people with no pedagogical experience be trained quickly to teach?  

I was listening to a podcast about how to learn a foreign language and the podcaster was listing this as a new way to learn and this gave me this idea.  

by zoe on Tue May 15th, 2007 at 08:59:14 AM EST
[ Parent ]
I've been doing some research this afternoon and it seems that yes, peoplel can be taught quickly how to tutor others.

NOW, I would require some help in the following please:

  •  who to address this idea to - Länder or Bundesminister?  and if so, for which Ministry?

  •  is there a place I can find some idea of the existing subsidies for this type of idea?

Thanks for your help.  If I get this together, I hope to put together some sort of rough plan in the next week.  

Maybe Eurotrib can become some sort of activists' hatchery as well as a blog.  Wouldn't that be something?

by zoe on Tue May 15th, 2007 at 12:18:45 PM EST
[ Parent ]
When it comes to language courses for integrating migrants, it looks like the Bundesamt für Migration und Flüchtlinge is who you want to talk to. You can get the lowdown here.

This is different from extra instruction in a school context; for that you would need to address the Länder individually.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Tue May 15th, 2007 at 12:37:11 PM EST
[ Parent ]
thanks, dvx.  that's part 1.

Is there some sort of site with existing government subsidies, do you know?

I know several countries that have this.  

by zoe on Tue May 15th, 2007 at 12:45:00 PM EST
[ Parent ]
Sorry mmmm, I don't know of one. The Länder all have their own programs, as do some regions, but I don't know offhand where I would find a central list.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Tue May 15th, 2007 at 01:29:21 PM EST
[ Parent ]
Thanks, I found some names of people that could help.

I am pretty excited about this.  It's nice to act, not just talk.  

by zoe on Tue May 15th, 2007 at 01:41:26 PM EST
[ Parent ]
I had a company which had a number of English as a 2nd language personnel. We brought in an English tutor once or twice a week (I don't remember.) It was highly beneficial for them and for us English speakers. Everyone was more comfortable exchanging ideas, etc.

Whether this could translate into a language lab with screen and cameras internet-linked into a native speaker who isn't trained in language tutoring...sounds like a stretch. But if there is a way to get someone trained up quickly into a program...perhaps you are onto something.

Never underestimate their intelligence, always underestimate their knowledge.

Frank Delaney ~ Ireland

by siegestate (siegestate or beyondwarispeace.com) on Tue May 15th, 2007 at 01:48:16 PM EST
[ Parent ]
I don't exactly understand what you mean, but drop me a line and we'll "talk" off-line.
by zoe on Tue May 15th, 2007 at 02:10:56 PM EST
[ Parent ]
<picture of swarms of Turkish and Polish immigrants speaking in Saxon dialect>

Hehehe...

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue May 15th, 2007 at 07:56:38 AM EST
[ Parent ]
poverty doesn't count, as long as they work. The working poor have the additional advantage that they have neither the time, the inclination or the ability to protest about their predicament.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue May 15th, 2007 at 04:34:05 AM EST
[ Parent ]
Except when they vote for the Left Party, and then we act outraged at the spread of extremism/populism.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue May 15th, 2007 at 04:36:32 AM EST
[ Parent ]
Sometimes they vote for the right... the extreme right...
by Torres on Tue May 15th, 2007 at 05:58:38 AM EST
[ Parent ]
This is one side of the coin, but accross the board, the German recovery has not been jobless. The unemployment rate has dropped 2 percentage points from where it was last year, and more than 3 percentage points from where it was two years ago (9.5 to 11.5 and 12.6 percent).
by nanne (zwaerdenmaecker@gmail.com) on Tue May 15th, 2007 at 07:00:46 AM EST
[ Parent ]
The important questions are:
  1. How much of the drop is down to employment growth, and how much is due to people falling out of the workforce?
  2. What kind of jobs have been created?

(I haven't yet researched these questions in detail, so they are really just questions.)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue May 15th, 2007 at 07:28:25 AM EST
[ Parent ]
3. What part has wage restraint played?
by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 15th, 2007 at 07:52:21 AM EST
[ Parent ]
Year-on-year wage growth:

The number of workers has increased a lot, and yet that did not translate into growth, or even spending growth:

Germany's growth has been driven largely by exports and not domestic demand:



In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue May 15th, 2007 at 08:42:00 AM EST
[ Parent ]
Answering my own questions:

  1. According to the ILO statistic, from March 2006 ro March 2007, unemployment fell by 690,000, employment grew by 602,000, while population change was minimal ; the ratio of 15-64-year-olds employed grew by 1.6 percentage points (to 69.3%) -- a case for true job creation.

  2. The ratio of 'underemployed' (who work but would do so more) fell by 0.3% year-on-year, that would be a positive, but (see next link) there was also some reduction of average hours worked. Here is something on jobs, up until Q4/2006. There was growth in Q3+Q4 in agriculture and in the construction sector, still reduction in the production sector, biggest growth however was in the service sector. That does say something but not much, I should look for further data.


*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue May 15th, 2007 at 07:55:09 AM EST
[ Parent ]
Good digging! The ratio of underemployed persons fell by 0.3 percentage points (to 12.7 percent from 13 percent). Sorry for nitpicking, but there's a difference.

The question of 'what kind of jobs' is a bit more difficult to answer, probably. Another good question is where the jobs are being created (unemployment rates were high in much of the west as well).

by nanne (zwaerdenmaecker@gmail.com) on Tue May 15th, 2007 at 08:28:04 AM EST
[ Parent ]
0.3 percentage points

The one time I forget it it is pointed out -- ET :-)

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue May 15th, 2007 at 08:31:04 AM EST
[ Parent ]
Gotta get my PN points :-)
by nanne (zwaerdenmaecker@gmail.com) on Tue May 15th, 2007 at 08:44:01 AM EST
[ Parent ]
Wiedeking can get away with this because he has the backing of the Porsche family, which still holds a controlling interest.

The move on VW becomes a lot more interesting when one considers that VW supervisory board chairman Ferdinand Piech is also the "head" of the Porsche clan - his uncle founded the company, and his grandfather designed the original prewar beetle.

I agree that a lot of what Wedeking says is sound, but the whole thing is just so cozy it's creepy.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Tue May 15th, 2007 at 04:53:18 AM EST
because he has delivered massive profits, and thus market players, even if they are unhappy not to be given the information and "behavior" they expect, are motivated enough by these profits to buy thr shares.

He has the 'luxury' of strong results (possibly made possible by the longer view taken by the family shareholders) to brush off the usual requests for short term performance standards (including cutting costs and the like).

But the point is that he has proved that some of these 'costs' (i.e. in his workers) are actually smart investments. Of course, that lesson will not be remember in any systematic way by investors.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue May 15th, 2007 at 05:03:48 AM EST
[ Parent ]
I entirely agree that by the standards of our day Wiedeking is an extremely farsighted and insightful manager who understands the importance of long-term thinking. Certainly other corps would do well to follow his example.

I was merely noting that given the Porsche ownership structure, he can tell the market playas to go pee up a rope as long as he has the family behind him. (Wikipedia notes that "As of 2005, the extended Porsche and Piech families controlled all of Porsche AG's voting shares.".)


The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Tue May 15th, 2007 at 05:20:34 AM EST
[ Parent ]
Well. lets take one step back and look at the big picture. The current economic climate is very favorable to luxury items. Sales of luxury cars, Porsche included, have broken consecutive records during the last few years (using Portugal figures, here).

So i have the feeling that some of his success comes from other CEO's not acting like he does.

by Torres on Tue May 15th, 2007 at 06:13:24 AM EST
[ Parent ]
Meanwhile, the backdrop to this development is that Porsche the company buys into VW, to 'protect' VW from takeover after the EU crushed the 'VW law' (a law expressedly designed to prevent hostile takeover and majority control by any actionary).

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue May 15th, 2007 at 05:07:56 AM EST
[ Parent ]
Wiedeking can get away with this because he has the backing of the Porsche family, which still holds a controlling interest.

Yes, if it was down to institutional shareholders, he'd be out of a job. Gotta watch the bottom line (and race towards the bottom).

It reminds me of CostCo in America. It's like an ehtical version of Wal-Mart and is very succesful, not just because of the relatively low prices but because a lot of its customers appreciate that plentiful well-treated staff provide a better shopping experience.

Yet two years ago they were threatened by institutional shareholders who felt that labour costs were too high compared with Wal-Mart and demanded a more aggressive policy in terms of wages and training. I think they got away from the threat, but I'm not sure how.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Tue May 15th, 2007 at 07:07:05 AM EST
[ Parent ]
Maybe its not "the" secret...but "a" secret...I wish all companies (not to mention countries) thought of their employees this way!!

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Tue May 15th, 2007 at 11:38:37 AM EST
It is interesting that what Wiedeking describes has been the Toyota model for decades.

Porshe has been a primary case of lean transformation used by Womack and Jones as an example. Good to see that the Toyota principles get traction on a deeper level than in their American competitors.

Orthodoxy is not a religion.

by BalkanIdentity (balkanid _ at _ google.com) on Tue May 15th, 2007 at 01:32:41 PM EST
I remembered and found an article titled "Porsche's Designs on VW Lead It to Steer to a Different Company Structure" from an FT dated 12 April 2007. It is behind the firewall now, but I'll transcribe some of it. It is in a section of the paper titled Corporate Governance. The other articles were much longer and Titled "German blue chips ponder switch to SE format" and "Unions weakened on supervisory board - Allanz's change from AG to SE has given greater flexibility to manaement", both of which describe how an SE can be set up with a smaller board and within some limit no have to enclude reps from the employees, something that the FT writers seemed to imply was a good thing. For example, one quote from the latter, "Under German AG law, unions can block the first round of management appointments, which need 2/3s of votes, sometimes triggering a lengthy internal battle.

Anyway, from the Porsche article:

Porsche...has decided to turn itself into a European Company (SE) - but for an unusual and defensive reason...
The carmaker is concerned that if it eventually takes over VW...then its supervisory board structure could be at risk as a side effect.

Porsche's board has just 12 members - the number allowed as an SE too - with five of the six directors drawn from the Porsche and Piëch families, who hold all the voting rights in the company.

But Porsche was so worried that consolidating VW would cause it board to grow to 20 members, due to the far higher number of employees (at VW)...that it decided to act. It will trim its existing operating busines and place a new holding company...an SE, above it.

The holding company, which will have 20-30 employees...would need only a 12 member board under German law.

"But if we take over VW at some time, that would change and we would have to offer seats to their employees representatives as well," says an official, clearly appalled at the prospect.

Benevolent dictators using the word 'appalled'. Cool.

Never underestimate their intelligence, always underestimate their knowledge.

Frank Delaney ~ Ireland

by siegestate (siegestate or beyondwarispeace.com) on Tue May 15th, 2007 at 02:24:21 PM EST
industrial capitalism that I posted here, that folks were so kind to.

Obviously, Mr Wiedeking is an example of what those old industrial capitalistssounded and acted like.  They were once the rule--now they are the exception.  Guys like this once produced an economic miracle--that is even what the Germans called it.


"Remember the I35W bridge--who needs terrorists when there are Republicans"

by techno (reply@elegant-technology.com) on Tue May 15th, 2007 at 06:04:45 PM EST
There's always Venture Communism of course...

http://www.telekommunisten.net/

These aren't exactly horny-handed sons of toil: they produce cutting edge communications software.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue May 15th, 2007 at 08:44:05 PM EST
[ Parent ]
I'm suspicious of the nutella. Don't see how anything good can come of it.
by rootless2 on Tue May 15th, 2007 at 10:12:40 PM EST
[ Parent ]
Bring back the old values of the Krupps - well, maybe not.

Is paternalism really better than finance capitalism? All those happy Stuggart workers, voting far right just like the guys at Electric Boat used to do.

by rootless2 on Tue May 15th, 2007 at 10:06:02 PM EST
[ Parent ]


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