COMMENT: A shabby compromise at VW instead of drastic reforms

Franz W. Rother is Editor-in-Chief of Automobilwoche

Volkswagen's new pay deal with its workers took a load off the mind of Bernd Gottschalk, president of the German Association of the Automotive Industry (VDA).

German politicians were also relieved. Mass protests and strikes at VW could have significantly harmed Germany's image as a manufacturing location.

A prolonged conflict between VW's workers and management would also have put many suppliers and VW dealers in a precarious position -- not to mention VW boss Bernd Pischetsrieder.

However, the reaction of analysts, investors and VW's rivals to the compromise deal was sheer disbelief -- and rightly so.

Trade unions won job guarantees for workers at VW's six western German plants until 2011.

VW's current 103,000-strong German workforce will remain at that level for the next seven year whatever happens with the company's order books.

This is madness! I am sure that the job guarantees will soon become a heavy chain that VW will have to drag.

There is no sign of an upturn in the German automotive market despite the increase of new registrations in October.

Sales of VW's most important model, the Golf, are going quite well but it is not certain that this trend will continue next year.

Planned price increases on the Golf could quickly diminish the demand. What will happen then? Will workers at VW's Wolfsburg or Emden plants only have a 20-hour working week?

VW has made the rescue work by future brand boss Wolfgang Bernhard much more difficult. I am sure that General Motors would not give employees at its Opel brand such job guarantees.

The VW management also had to make other concessions. Proposals by Peter Hartz, VW's personnel boss, that employees should help fund future VW investment from their wages and that Christmas bonuses to employees should be linked to profits were dropped.

Still, at least the wages of VW employees were frozen for 28 months under the agreement.

Current VW employees -- right down to apprentices -- are paid 20 percent above the metal industry average and the new agreement did nothing to change that.

New VW workers will be paid less than existing ones -- but they will be better paid still than Ford or Opel workers in Germany.

The VW agreement is a disappointment, especially after Pischetsrieder's powerful words at the beginning of the wage negotiations. VW's management has given in once again.

The VW supervisory board will be meeting in Wolfsburg at the end of this week. It will be interesting to see if it will give its blessing to this compromise agreement and the far-reaching investment promises connected to it -- such as for example building an SUV based on the Golf in Wolfsburg instead of in a low wage country.

The agreement will lead to savings worth 1 billion euros by cutting wage costs.

Further cost saving measures are badly needed to make VW internationally competitive again.

Bernhard will need to do a lot of hard work when he arrives at Wolfsburg.

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