GERMANY: Clash with Unions Looms at VW

Volkswagen, Europe's biggest carmaker, is heading for a showdown with its 100,000-strong German workforce after trade unions rejected company proposals to increase the working week to 35 hours without extra pay late on Monday.

Horst Neumann, VW's personnel director, further raised the hackles of IG Metall, the engineering union, by warning in talks in Hanover that thousands of jobs could be axed and indicating that a 2004 agreement ruling out compulsory redundancies until 2011 could be renegotiated.

VW has assured investors that it would carry out a savage restructuring programme at its core Volkswagen brand designed to raise productivity and cut costs to prevailing west European standards and boost pre-tax earnings by â'¬5bn (£3.4bn) by 2008.

Wolfgang Bernhard, an ex-Chrysler executive and renowned cost-cutter in charge of the restructuring programme, has already warned that 20,000 to 30,000 jobs at VW's six German factories could be lost and wage costs, which are 20% above the norm, must be brought into line with the rest of German engineering.

He aims to reach a deal with IG Metall by late this year. But the once-powerful union, which agreed to the current 28.8-hour week in 1994 in return for the saving of 30,000 jobs then, indicated it would only accept voluntary redundancies or early retirement. Hartmut Meine, IG Metall's chief negotiator, turned down Mr Neumann's request for early wage negotiations.

Mr Neumann, reiterating plans for a "great productivity offensive", said: "Volkswagen's situation demands that we grasp further sustained measures, including competitive labour costs.

"We must succeed, as our competitors are driving at high speed. Lower labour costs, high productivity and first-class quality ensure VW's competitiveness," VW's personnel chief added. "In these conditions, a better capacity utilisation of our plants can be achieved. All that is the pre-condition for the employment guarantees, which we take very seriously as before." VW's main Wolfsburg plant is said to be working at half-capacity.

Mr Neumann made it plain that VW "cannot wait until 2011" or the end of the 2004 deal, which froze wages. Holding out the carrot of building the revamped Golf, VW's best-selling model, at Wolfsburg, he said the other five German plants, including component factories, would have to raise their game substantially. "We need the willingness of IG Metall to accompany us down this road."

The looming clash at VW comes as global carmakers, including Volkswagen, are investing heavily in low-cost countries such as Slovakia, Poland, Ukraine and Russia, where at least four new plants are being built. They also plan to build or extend plants in China, India, Brazil, Vietnam and Turkey.

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