Automakers' cost cutting could lead to huge job losses

Two Europe's biggest car-makers, Volkswagen and Opel, will this week open the latest front in German industry's battle to slash costs, secure longer working hours and impose more flexible conditions -- or cut tens of thousands of jobs and shift production overseas.

VW pay talks with engineering union IG Metall tomorrow over its demands for a two-year pay freeze and a 30 percent cut in labor costs by 2011 to preserve 103,000 jobs at its six west German plants. Otherwise, it says, it could axe 30,000 jobs. Opel is to begin negotiations with the same union over its plans to raise the working week from 35 hours to 40, to virtually halve Christmas bonuses and even impose a pay freeze for five years amid threats to close its main plant at Russelsheim, near Frankfurt.

The talks take place against the background of continuing protests over the German government's measures to lower benefits for the long-term unemployed and other labor market reforms in moves to revitalize Europe's biggest economy and reduce unemployment, now almost 11 percent. They provoked demonstrations in 200 German cities yesterday.

The proposals tabled by VW and Opel are a substantial step-up from cost cuts implemented by DaimlerChrysler, owners of Mercedes, electrical equipment maker Bosch and engineering group Siemens, which met initial union resistance before agreement.

Peter Hartz, VW's personnel chief and architect of German Chancellor Gerhard Schroeder's labor reforms, has said labor costs at VW's Czech plants are 80 percent lower than in west Germany, where wages are 20 percent higher than in other car firms' factories. VW's pay talks will take place outside the engineering industry's collective bargaining arrangements, but 97 percent of its workforce is unionized.