Can Americans compete with quality-driven Germans?

Editor’s Note: Werner Eikenbusch, BMW’s head of workforce development for the Americas, left high school in the 10th grade for an apprenticeship program that combined on-the-job training with vocational school. He eventually returned to school to become an engineer, and at BMW’s only U.S. manufacturing plant, in Spartanburg, South Carolina, helped establish an apprenticeship program modeled on the ones back home to fill the void of skilled workers. He appears in our Making Sen$e segment, and spoke to Paul Solman in the extended transcript below about how the smart companies are investing upfront, for the long-term, in training productive employees.

So you’re a German success story. How did you get into this industry?

I actually grew up in Germany in a little village and my daddy and my mum were of a blue collar background, so for them, college was not something that they really envisioned for me. And really when I hit 10th grade, I knew that I wanted to work with my hands. So I left school and started an apprenticeship and found out a year into it that I was very different from a lot of other people. I had more intellectual interests and what have you, so in the good German tradition I stuck it out. I did my apprenticeship for three years, became a certified machine tool mechanic, but then decided I wanted to go back and pursue an academic education, which was possible. So I went back, finished my technical high school, got my engineering degree and then came to the U.S., where I got my graduate degree.

Why isn’t that the way we do things in America, do you think?

I mean you have to realize that this German dual system that many people talk about has a long history in Europe. It goes back hundreds of years, so it’s really very much embedded and it is actually a recognized — you could call it an educational pathway — that, for whatever reason, did not make it over into the U.S. So in that regard, it’s part of society. It’s just a very natural thing. About 50 percent of young graduates in Germany pursue this option right now.

So speculate a little more for me. Why the difference? What is it about America, in other words?
Well, first of all, it does take a good amount of investment in the young people, or whoever goes into apprenticeship — they could be older as well, of course — to pursue that and to support it. And I think many American companies right now are saying, if I need some skilled person, I can just hire them, instead of really investing in the front end. So I think, a little bit, it is a short-term return on investment profit picture. It’s more pronounced in the U.S. than I think in Europe.

So why has BMW been able to do it here, when it’s so difficult elsewhere?

I think often things take a leader that takes the initiative and says, this is something that I believe in and I want to do it. And I give a lot of credit to our previous plant president, who of course was always in competition with plants in Germany. And he said, well, if this is something important in Germany, and I’m competing with the German plants, it’s got to be something that’s important to me here. So he was one of the key drivers, many years ago, to say, we really need to build up a system like that here as well, so that I have the skilled people in the plant that I need as I launch new products, as I expand the plant, and so forth.

So the beauty of the program really is you have, or you develop, a broad-based, skilled labor force that you can draw upon whenever you have the need.

We don’t have a problem finding quality workers. There is a very long tradition in the textile industry here, so a lot of the people that we have hired come from that background. There is the industriousness, there is the reliability, there is the work ethic that really makes them successful here and makes us successful as a company.

If there were any issues, it’s always the issue about the highly specialized skills. So it’s not the quality of the worker and their mindset, it’s really the skills. We really have put programs in place to invest in that, to bring those skills to a different level. Because when you think about textiles in the past, there weren’t robots. A lot of our automated systems, as you will see, have lots of robots, so that’s a skillset that we really have to develop.

Meaning workers who know how to program, or fix, robots?

Yes, correct. These would be workers that can work with PLCs, or your programmable logic controller, that can program robots, that can do the diagnostics of when the automated equipment is down. Where might the fault lie? Is it the sensor, is it the robot, is it the PLC, and so forth. So we’re working very closely with the technical college system to develop those skillsets here.

OK, the textile workers are here. Their industry has gone. You have a workforce in place. But is there something about the culture of South Carolina, famously anti-union, that makes workers more compliant, easier to bring into a place like this?

I wouldn’t say compliant. What I would say is we enjoy great communication with management and the workers, and I think that is very much a culture that is in place in South Carolina, and that enables us, I think, to really have a much better collaboration and dialogue with people, and really address our needs as well as really address the associates’ needs. So, from that perspective, I think it provides a more collaborative environment for us.

So this is something that I learned when I was an undergraduate — codetermination, right. In Germany, the workers and management work together. That’s what you’ve imported here?

Well, I would call it direct communication. To me, it’s really a balanced relationship. We’re working very hard, of course, to make sure that we represent the management interests, but we also work very hard in human resources to make sure that we represent the associates’ interests, and I think right now, it’s a healthy balance.

So codetermination was at the board of directors level, that is the union or the workers had major representation on the board in Germany. And we don’t have that in the U.S.?

Correct. That system really does not apply in the U.S. context from a legal perspective.

But the management-labor relations here have a taste of it, in the collaborative sense.

I’ve seen it in Germany as well. The way I would describe it is human resources here has both hats on. It has the representation-of-management hat on, but it has also the hat on to really be the voice for the workforce, so in that regard the system is not that different, except it’s in one entity here, which is human resources, that really does both and finds that balance.

When people from other American plants come here and say, can we do this, because you’re obviously very successful, what do you tell them?

Yes, you can. Honestly, this is not rocket science. There are other companies here, and I want to give them credit, like Michelin, like GE — they are not only German or European companies, also U.S. companies — that invest in workers’ skill development through apprenticeships or scholar systems, whatever you want to call them.

I think a lot of it really has to do with the mindset. Are you willing to think long-term and invest in the front end to have the return on the investment in the career of a successful and productive employee? It’s just that you have an upfront cost.

But the criticism of corporate America for decades now has been that it thinks shorter and shorter-term because of the pressures of the quarterly earnings reports in the stock market, and so forth. So is there a way to turn around that mindset?

I think the mindset is changing, you listen to the president; we had the Secretary of Commerce here the other day. I think a lot of companies and also the government are talking about this and saying, we need to do something here to really develop this into a stronger system — more of an educational path that is both supported by government, but also ultimately supported by industry. There is a wave and a movement as America really gets more manufacturing back; There is this renaissance right now. People realize we all need to be partners and invest to have the skillsets we need for the future.

And why is there a renaissance in manufacturing now in America?

Well, there are a lot of good reasons, I think. Energy is very cost-efficient here. We have a great infrastructure in America. We have the educational institutions to really develop workforce skills, so I think you see a lot of companies that look at this market and say, this is a very important world market and we not only need to sell, but also produce, in this market. That was the decision that we made about 20 years ago.

And isn’t it also because labor is less and less a part of the total cost of production, and so the relatively high labor costs don’t matter as much as they used to? Because of the advent of robots.

I don’t know that I really agree with that. If you look at our operation, there is still a lot of labor in, for example, the assembly process. It’s not really all that automated. The body shop is. I think you have still a high labor cost, but you have a lot of other benefits that really offset this, and one of them, of course, is you want to be in one of the big markets — that is really something that most manufacturing companies or sales companies have realized. If you really want to be successful, you have to be a corporate citizen, not only sell product.

And why is that?

I would love to give you an answer. I don’t know. All I can say is that it worked very well for us. If you look at BMW’s sales in the U.S., we think that part of our success has been that we’re not only a sales company, but we really have developed into a corporate citizen. If you look at Toyota, for example, it’s a similar story, and if you look at the way they portray their company, they’re not just selling cars. They are really a corporate citizen in America; The two go hand-in-hand.

I’m skeptical of that. I don’t think that the typical buyer of a BMW thinks, “Well, ah. Of course, they have a plant in Spartanburg, South Carolina, so they’re one of us.”

Workers at BMW’s only U.S. manufacturing plant in Spartanburg, South Carolina, have the opportunity for on-the-job training through an apprenticeship program modeled after programs in Germany. Photo by PBS NewsHour

I understand your skepticism. I would respectfully disagree. I think it does have an impact – a positive impact.

So what is, ultimately, the return you’re getting on the investment you’re making?

The return is that we have an associate that really is a productive employee, with a long-term career; that’s really the long-term return on investment. I haven’t calculated it, but like somebody said, it’s a little bit like religion. You either believe in it, or you don’t.

So I’m looking at workers over there that look like absolutely typical Americans. The question I have, and I think a lot of people will have is, can they actually compete with the famously careful, quality-driven German worker?

Yes, absolutely they can. And we have proven that here in this factory. I mean, we have the same quality standards as all of the German plants; we compete very well on an efficiency and productivity scale, so from that perspective it works great.

So a lot of people in America right now talk about just importing this German dual education system, and I believe that would be the wrong approach. The basic elements of the system are great, but also they have a long tradition that really makes the system fairly rigid, and I think we have an opportunity in the U.S. to really take the best of that system and kind of mirror it with what we have in America, like for example, a two-year technical and community college system, and create the same elements, but with an outcome that’s really more tailored to what we need.

What gives you the confidence that you have a particular insight? I know you’ve been here a long time, but to understand how you take the best of America, take the best of Germany and put them together.

Well, I met my now wife, who is American, when I did graduate studies in the U.S. I actually dragged her to Germany for five years, so we lived there. So we have lived on both sides and we have our daily exchange of cultural differences, having been happily married for 25 years. So having spent a lot of time there and a lot of time here with my wife and daughter, I think I have a pretty good insight into both cultures.