WOLFSBURG, Germany -- Volkswagen AG will ask German workers to forego pay raises for two years as part of a broader plan to cut labor costs by some $2.51 billion in the next six years, the carmaker said Monday.
There is "no room" for increased wages, said VW personnel chief Peter Hartz, who wants to use next month's wage negotiations as a starting point to slash its labor cost base by 30 percent by 2011.
He also rebuffed a demand from the IG Metall metal workers union that Europe's biggest carmaker guarantee 103,000 jobs at six western German plants for the next decade.
Reuters reported on Saturday that VW would insist on a pay freeze of at least one year, according to a company source.
Last week, VW's works council and the IG Metall union also staked out a hard-line bargaining position for the talks, demanding a 4 percent wage increase and extensive job guarantees.
VW, which recently warned that it would fail to meet its 2004 profit target by about $734 million, is grappling with currency head winds, high production costs, slack demand and an erosion of prices in its key markets.
NO PRODUCTION SHIFT
VW's Hartz, architect of the country's broader labor market reforms, demanded more flexibility from a work force that earns about a fifth more than other German metal workers.
He said though that this didn't mean that current employees would have less money in their pockets: "It's much more about an intelligent, structural re-orientation of the labor costs."
The VW negotiations are being closely watched as a gauge of German workers' readiness to get job security in exchange for wage concessions that would boost the competitiveness of Europe's biggest economy.
Germany's DaimlerChrysler last month managed to wring $612 million in labor cost savings from German employees at its flagship Mercedes unit in exchange for job guarantees, after threatening to ax 6,000 jobs at one plant.
Unlike Mercedes boss Juergen Hubbert, Hartz didn't take out the heavy ammunition by threatening to move some auto manufacturing abroad. "We're offering alternatives to relocating production," he said.
The company presented a seven-point plan to be implemented in the coming six years that included reducing the number of different wage classes to 12 from 22 and linking bonuses to corporate earnings.
Hartmut Meine, who heads IG Metall's negotiating team in VW's home state of Lower Saxony, said it was unfair to make staff bear the brunt of the efficiency drive at VW.
"If it came to a pay freeze, it would basically mean an announcement that shareholders also get nothing," he told German television on Monday. "Shareholders get a regular dividend, so why should the workers get nothing?"