Workers at DaimlerChrysler German Plant Agree to Forgo Raises in Exchange for Job Security

BERLIN July 23, 2004; David Rising writing for the AP reported that workers at DaimlerChrysler AG's largest plant in Germany agreed Friday to forgo raises and make other sacrifices in exchange for job security, the latest sign of an increased willingness by German employees to take cuts amid increasing global competition.

The agreement to DaimlerChrysler's demands for 500 million euros ($612 million) in annual savings was part of a larger struggle to cut labor costs in Europe's largest economy, where pressure is growing for companies to shift traditional union jobs to eastern Europe or other lower-wage areas.

DaimlerChrysler had threatened to shutter the Sindelfingen plant, near Stuttgart, and move production of its Mercedes C-Class cars to a factory with lower costs in Bremen and another South Africa, which would have cost the 6,000 Sindelfingen workers their jobs.

In a deal hammered out over three days of negotiations and announced early Friday morning, workers gave up a planned 2.8 percent raise in 2006 and agreed to other cuts, while DaimlerChrysler's top executives pledged a 10 percent cut in their own compensation and unspecified pay concessions by other senior managers.

In return, the German-U.S. automaker guaranteed the Sindelfingen workers their jobs through 2012. A main sticking point had been employee demands that the company guarantee jobs for longer than four or five years.

Keeping their jobs has lately become more of an issue for German workers than wages, said Georg Stuerzer, an auto analyst at HVG Group in Munich.

"In the last three to four years in Germany everyone has known we have to change something," he said. "Job security is becoming much more important and I can imagine that many companies in Germany will try to improve their cost situations."

Under the deal, workers got to keep Sindelfingen plant perks where they accumulate five minutes of paid break time accumulated per hour and earn higher premiums for late shifts than workers at German plants elsewhere.

While engineering giant Siemens AG achieved a groundbreaking deal last month by getting workers at phone repair facilities in northern Germany to work 40 hours a week instead of 35 for no added pay, the DaimlerChrysler agreement might have an even greater effect, Stuerzer said.

"From the global point of view we are under pressure, and the auto industry is one of the best performing industries in Germany, so it has a certain signal for the rest of the labor markets" Stuerzer said.

The deal, which followed a week of protests and brief work stoppages, was hailed by Chancellor Gerhard Schroeder as the kind of agreement that Germany needs to break out of three years economic stagnation.

"The compromise reached will contribute to a strengthening of the economic revival and upswing," Schroeder said in a statement issued while on vacation in Italy. "The ... agreement is a victory of common sense. It gives the company more flexibility amid increasingly tough international competition and secures jobs in German factories."

He said the DaimlerChrysler agreement should also help bring negotiations over working hours and labor costs later this year between automaker Volkswagen and its employees "to a successful ending."

DaimlerChrysler has been pressing for cost cuts at its luxury Mercedes division -- an earnings mainstay -- as it comes under increasing sales pressure from a slew of new models from BMW and Toyota's Lexus brand.

Stuerzer said the company need the cost cuts. "It is certainly an improvement for the company," he said.

Savings from the agreement are due to take effect by 2007, when the next C-Class generation is due to go into production, the company said. The deal will also have some white-collar workers work longer hours and includes a 20 percent wage cut for new staff in service jobs, such as security and cafeteria workers.

DaimlerChrysler did not detail how the savings added up to 500 million euros, but employee representatives had earlier said giving up the pay raise accounted for almost 200 million euros ($245 million).

Chief executive Juergen Schrempp called it "a good solution for DaimlerChrysler and for Germany."

DaimlerChrysler's U.S. shares were down 52 cents at $44.13 Friday afternoon on the New York Stock Exchange.

Tens of thousands of DaimlerChrysler workers staged protests across the country after DaimlerChrysler asked for the cuts, and had threatened to escalate the demonstrations Friday if no agreement was announced.