Tesla meets the European social model

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

In Sweden, the innate suspicion towards organised labour of a US tech entrepreneur has collided with Europe’s social model. The Swedish IF Metall union is in an escalating battle with Elon Musk’s Tesla over the carmaker’s refusal to sign a collective bargaining agreement, where employers and unions set labour conditions. The dispute has already spread to dockworkers in Norway and Denmark. Its implications for Tesla, unions and the auto industry stretch across Europe, and back home to the US.

Under the Nordic labour model that Sweden typifies, unions and employer organisations jointly set wages and working conditions in most companies at national level; the government does not intervene. Both sides tend to agree this has kept strikes down compared with, say, France. The unions see collective agreements as especially vital in a nation with no minimum wage.

A wrinkle here is that many small companies in Sweden are not part of collective bargaining agreements — and despite its global clout and renown, Tesla’s labour presence in the country, where it has no manufacturing, is relatively tiny. Only about 130 mechanics in Tesla workshops are involved in the dispute. That has led to some sympathy for the US automaker in Swedish business circles, especially given the unions’ hardball tactics.

IF Metall and supporters in other sectors are certainly open to charges of heavy-handedness. Using a right to sympathy action, cleaners, postal staff and dockworkers have stopped co-operating with Tesla — preventing it from receiving registration plates for cars or even unloading them from ships. Danish and Norwegian dockworkers are set to prevent the company from bringing cars into Sweden from their ports.

The unions argue this is an existential issue. They have pressed other tech companies such as Northvolt, Klarna and Spotify to sign collective agreements. If a multinational such as Tesla can avoid a deal, they fear, others might do the same, undermining a bargaining system that has existed since 1938.

The stakes are high for Tesla, too. Being seen to “fold” in Sweden could embolden its workforces elsewhere. In Germany, where worker representation is required by law, Tesla is resisting ambitions by the big unions to take the role of organising workers at its 10,000-strong Grünheide factory. In the US, the United Auto Workers union is making unusually public efforts to unionise workers at 13 carmakers that have non-union plants, including Tesla, after it wrested sizeable pay rises and concessions from General Motors, Ford and Stellantis in a six-week strike.

For Musk, challenging established ways of doing things is central to his modus operandi. His Tesla business is part of an invading band of EV makers aiming to supplant Europe’s auto giants — which dragged their feet on the new technology — precisely by rejecting old practices. They are apt to see attempts to force them into existing labour relations pacts as a form of protectionism.

But business leadership is also about recognising what works. The Nordic model of labour co-operation has been found to be positive for manufacturing productivity, and to have made workforces more adaptable and willing to adopt new technology — making it generally good for employers, too.

Disrupters are vital to economic dynamism; Musk has done more disrupting, and shown more dynamism, than most. But foreign investors need to respect the legal and social rules and the business cultures of the countries where they seek to do business; doing otherwise can harm their brands. It should be for Musk and his company to adapt to a Swedish model that has a record of working well, rather than for the Swedish model to adapt to Musk.