Out go jobs, up go the hours: German unions confront a cold new reality

DaimlerChrysler's workers are up in arms over planned cost cuts. They're not alone, writes David Brierley

Sixty thousand employees of Mercedes, the DaimlerChrysler subsidiary, took to the streets on Thursday to protest at plans to cut 6,000 jobs. Further union-led protests can be expected this week at Volkswagen, which is set to reveal diving profits and a new cost-cutting strategy to shareholders.

Sixty thousand employees of Mercedes, the DaimlerChrysler subsidiary, took to the streets on Thursday to protest at plans to cut 6,000 jobs. Further union-led protests can be expected this week at Volkswagen, which is set to reveal diving profits and a new cost-cutting strategy to shareholders.

But for the unions, and for Germany's manufacturing workers, the writing is on the wall. The country's leading companies are aiming to raise working hours dramatically to reduce costs and improve competitiveness. They are threatening to move production to cheaper plants, particularly in Eastern Europe, and cut jobs.

The unions are bewildered. DaimlerChrysler has stated its aim to slash costs by €500m (£330m) before producing the next C Class limousine at its traditional Sindelfingen base in Stuttgart. Along with the job losses, Daimler wants to introduce a 40-hour week across the board, without raising wages.

"This is not negotiation, this is a brutal attempt at blackmail," claims Erich Klemm, Daimler's union leader. The unions offered Daimler wage cuts of €200m, but this was turned down. "Savings of half a billion are completely out of order."

Outraged union leaders point out that Mercedes is by far the most profitable of Daimler's subsidiaries, earning around €3bn per year, and Sindelfingen is its most profitable factory. Mercedes insists it wishes to reduce its cost per vehicle by €500, bringing it in line with its more efficient rival BMW.

"Increasing competition from Eastern Europe has created a cost problem for us," insists Jürgen Hubbert, the chairman of Mercedes.

And if the problems at the profitable Mercedes are bad, for Opel, the loss-making German arm of General Motors, and Volkswagen they are worse. General Motors is seeking double-digit cuts in costs through greater flexibility, in order to achieve breakeven. Carl-Peter Forster, the president of GM Europe, says: "Our unit costs in Germany are not competitive."

Peter Hartz, the human resources director of Volkswagen, told the unions last week that costs have to fall by 30 per cent. Production-line workers enjoy contracts specifying a 29-hour week.

Hartmut Meine, the union head at VW, admits: "Volkswagen is in a worse position than in the past. We face a tough negotiating round. But the widely publicised view that we are en route to a 40-hour week is just a myth."

Still, with the country afflicted by unemployment of nearly 10 per cent, low growth and declining competitiveness, employers have been encouraged to attack the 35-hour week. Siemens led the way by threatening to move mobile phone production from two German plants to Hungary unless a 40-hour week was accepted. It won. Man, the trucks group, and Bosch, the electronics giant, head the lengthening queue of German employers looking to raise working hours. In the service sector, journalists and television production staff have just seen their 35-hour weeks increased by five hours and expanded to include Saturdays, without any salary increase or overtime.

"Longer hours are worked practically everywhere in the world. Knowledge and work are being lost. Does the world really come to an end if we work a 40-hour week again?" asks Heinrich von Pierer, the chairman of Siemens.

Some economists and employers have been particularly enthusiastic about the trend. Klaus Zimmermann, the head of a leading economic research group, DIW, even suggested that Germans might work a 50-hour week "on occasion".

This caused widespread outrage but provoked employers to consider alternatives. Kai-Uwe Ricke, the head of Deutsche Telekom, forced the unions to accept a wage cut for a 120,000 workforce rather than lose 10,000 jobs. The German logistics and distribution industry has told the unions their workforce faces a week's cut in holiday entitlement.

The unions are not happy. The once all-powerful IG Metall, which represents the Daimler workers, has celebrated the 35-hour week as one of its greatest achievements. IG Metall fears that this will be lost, along with the privileged negotiating position that allows the unions to impose national settlements on industry irrespective of companies' trading positions. Many economists view this as the greatest destroyer of jobs.

The German government has avoided involvement in the dispute. By contrast, Edmund Stoiber, the leader of the conservative Bavarian Christian-Social Union, has backed management by suggesting workers in factories across Germany might vote for a 40-hour week without consulting their unions. "If two-thirds of the workforce are in favour, then longer hours could be worked."

Many younger employees are unhappy about the role of their unions, and years spent discussing the need for workplace reform have prepared even holiday-loving Germans for longer hours and more years at work. But, above all, the threat of unemployment has increased their willingness to make concessions; one survey suggested four out of five Germans fear for their jobs.

Dieter Knauss, an IG Metall leader, says: "If an entire workforce accepts a 30 per cent cut in income, as at Siemens, you can imagine the psychological pressures they face. You can only do such a thing with employees who are terrified they might lose their jobs and cannot find anything else nearby."