<p>This paper reconsiders the institutions of the German model of industrial relations and collective bargaining, with more emphasis being accorded works councils because of their unique function and yet material shrinkage in recent years. The latter development has been a function of a yet more pronounced decline in union coverage, such as to call into question the continued existence both labor pillars of the model in a process often depicted as a headlong rush to a liberal market economy. In fact, the change in the operation of the German model has been less sudden than it has been sizable, having evolved over more than 30 years. For this reason, much of the paper is given over to the process of decentralization in collective bargaining and its variants, one interesting aspect of which is that the links between works councils and trade unions have become more intimate even if dominated by the process of erosion. Hence, the German model is marked by fragmentation but remains functional through innovation and reconfiguration. Having identified instances of the latter, the balance of our treatment concerns the prospects for the future and the scope for institutional revitalization. As it is often suggested that translating progress in institutional development may require support in the form of government intervention in markets, our attention then shifts to recent European and German government initiatives and the accompanying constraints.</p>