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German automaker adds hours to workers Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=20601100&sid=ayX02pGuAzEM&refer=germanyhttp://www.bloomberg.com/apps/news?pid=20601100&sid=ayX02pGuAzEM&refer=germany
Volkswagen, Union Reach Agreement on Longer Workweek (Update4)
By Chad Thomas
Sept. 29 (Bloomberg) -- Volkswagen AG, Europe's largest carmaker, and the IG Metall labor union reached an agreement to extend the workweek for employees in Germany without additional pay in exchange for product and investment guarantees.
Workers will put in an additional 4.2 hours a week, based on production demand, without a salary increase, the Wolfsburg, Germany based carmaker said in an e-mailed statement today. Volkswagen in turn made production pledges for all six of the its western German factories.
``This finally clears the way for Volkswagen to move forward,'' said Patrick Juchemich, an analyst at Sal Oppenheim in Frankfurt with a ``buy'' recommendation on Volkswagen's stock. ``It looks like the most important aspect of this agreement is the flexibility.''
The agreement includes a promise to build the next version of the Golf hatchback and another model at Volkswagen's main Wolfsburg, Germany, plant. Chief Executive Bernd Pischetsrieder had threatened to move Golf production if workers didn't agree to more hours without extra pay. Reducing labor costs is critical to his plan to more than triple pretax profit to 5.1 billion euros ($6.5 billion) in 2008 from 1.1 billion euros in 2004.
``With these points which we have agreed upon today, we have taken a big step forward in the restructuring of Volkswagen,'' Horst Neumann, the carmaker's personnel director, said in the statement. ``Being competitive is a prerequisite for providing jobs. That's what we have achieved with a return to a normal workweek.''
Flexible Hours
Factory workers will work between 25 and 33 hours a week compared with 28.8 hours currently, Volkswagen said. The carmaker had originally wanted employees to work a 35-hour week without extra pay, something labor leaders had said they adamantly opposed. Under today's agreement, workers will receive additional money for any hours beyond 33.
The carmaker also agreed to implement a profit-sharing program for workers, based on the Volkswagen brand's performance, and pay an additional one-time sum of 6,279 euros for each employee's pension.
Shares of Volkswagen rose as much as 1.65 euros, or 2.4 percent, to 69.20 euros and were up 0.2 percent at 67.65 euros as of 1:13 p.m. in Frankfurt.
Cutting 20,000 Jobs
Pischetsrieder has also set a target of slimming Volkswagen's western German workforce by about 20,000 positions, or 20 percent, as part of his effort to scale back spending on labor. The CEO said at the Paris Motor Show yesterday the carmaker was more than 75 percent of the way toward that goal, with almost 16,000 workers having accepted buyout packages or early retirement offers.
Employees agreeing to leave the carmaker by the end of this month receive as much as 249,480 euros, depending on their length of service and current pay. The program continues through June 2007 at reduced rates.
The carmaker is using voluntary measures to cut employee numbers because it's bound by a November 2004 labor agreement guaranteeing jobs through 2011 in exchange for a wage freeze that will save 2 billion euros annually. Today's agreement, which runs from Jan. 1 to the end of 2011, secures that guarantee against mass firings.
``The workers have done their part for the restructuring of the Volkswagen brand, now it's the management's turn to do their part,'' Hartmut Meine, IG Metall's chief negotiator with Volkswagen, said in a separate statement.
Agreement on Tiguan
Wolfgang Bernhard, head of the Volkswagen brand, has insisted labor-cost reductions are imperative for the carmaker to export profitably to the U.S., the world's largest market. Bernhard held up a plan a year ago to produce the Tiguan, a new compact sport-utility vehicle, in Wolfsburg until labor leaders agreed to cost cuts that reduced the per vehicle price by 850 euros.
Volkswagen spends an average of 55 euros an hour for salaries at its western German factories, compared with 40 euros an hour at competitors. Bernhard said yesterday his goal was for the namesake brand to post a profit this year, after the plants lost ``several'' hundred million euros last year.
Under today's agreement, workers next year will receive a one-time payment of 1,000 euros as a salary increase, and from 2008 will earn whatever increase is negotiated for the entire industry in the German state of Lower Saxony, where Volkswagen is based. Industrywide labor agreements are common in Germany.
Last Updated: September 29, 2006 07:23 EDT
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