Sept. 10, 2004
Stephen Power
Wall St Journal
As many as 30,000 jobs - equal to 17 per cent of Volkswagen's German workforce - could be in jeopardy if Europe's largest car maker is unable to enact a proposed wage freeze and extract other concessions from its unions in negotiations that begin next week, according to the company's chief financial officer.
The comments by Hans Dieter Poetsch represent Volkswagen's most explicit statement to date of what is at stake in the latest, and potentially most significant, face-off between German labour and management over wages and working conditions.
It comes after DaimlerChrysler in late July prodded its unions to forgo a planned 2.8 per cent wage increase and accept longer working hours for support staff with no additional pay. That followed DaimlerChrysler's threat to eliminate 6000 jobs by shifting production of some of its Mercedes-Benz luxury cars from the Stuttgart area to foreign plants.
The possibility of job cuts underscores the deep trouble VW is facing in all major markets.
In Europe it is ceding market share to Asian competitors. In China, where rivals are booming, VW's August sales fell 12 per cent compared with August 2003.
And in North America, Mr Poetsch said VW's losses would probably exceed €1billion ($1.8 billion) in 2004. Its North American unit had a loss of €503million in the first half.
Large job cuts would be an especially sharp departure for Volkswagen.
The company traditionally has maintained close relationships with its unions and devised unique methods for protecting German jobs, such as the creation of a four-day working week during the 1990s in order to avoid laying off tens of thousands.
Some industry analysts have questioned how long Volkswagen can maintain its German employment levels amid increasing competition in Europe, where the company is battling to hold on to its market leadership amid rising sales by Asian car makers such as Toyota, Nissan and Hyundai.
For the first half of 2004, Volkswagen's market share in Western Europe was 17.5 per cent, slightly lower than its 17.7per cent share in the year-earlier period. The market share for Japanese manufacturers rose to 13.4 per cent from 12.3 per cent.
In addition to high production costs in Germany - where hourly wages in the manufacturing sector are $US33 € ($47.40) on average - Volkswagen is suffering from the effects of a strong euro, which make its exports more expensive, and bitter price wars in key markets.
In China, where Volkswagen has long been the market leader, operating profit generated by the company's joint ventures with Chinese partners fell 25 per cent to €145 million € and car deliveries fell about 14 per cent.
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