HANOVER, Germany -- Volkswagen enters a fresh round of talks with its workers on Tuesday but analysts say little headway is likely as unions protest against the carmaker's threats to axe more than 30,000 employees in Germany.
German metalworkers union IG Metall is demanding a 4 percent pay raise on top of extensive job guarantees but Europe's largest car producer is hoping to convince its employees to accept a wage freeze for the next two years.
Ahead of the talks VW was in uncompromising mood, while the union said it would insist on job guarantees.
VW CEO Bernd Pischetsrieder told German newspaper Berliner Zeitung on Tuesday that he would not be cowed by union threats of a strike.
"Management won't prevent a strike at the price of not changing things that need to be changed," he told the paper, referring to wages that are often 20 percent higher than those of German rivals. "Our personnel costs have to be adjusted to a competitive level."
IG Metall's top negotiator signalled once again he would back down from insisting on implementation of worker demands in full -- but only if employees got guarantees on their jobs.
"We will certainly then try to work out a compromise both in terms of a pay rise and the (duration of) job security and other topics," Hartmut Meine said before getting into the talks in the northern German city of Hanover.
Outside, more than a hundred VW workers gathered to protest at management plans, echoing the union's call for money and job guarantees.
Following the first round of talks on Sept. 15, the union said the two sides were still "miles away from each other," and few expect a finished deal to be hammered out during the second round.
Apart from the more than 4 billion euros the company aims to save this year and next, VW has said it aims to cut personnel costs by 30 percent, or roughly $2.3 billion, by 2011.
The cost cuts are vital for VW as it battles currency headwinds and slack demand in its core markets of Germany, the United States and increasingly in China, forcing it to cut its 2004 operating profit forecast by 600 million euros to 1.9 billion euros ($2.33 billion).
Focussing on its drive to reduce costs, the company said it was postponing development of a new model, adding that it had other priorities.
The "C1" passenger car, a model slated to fill the gap between VW's mid-sized Passat and its Phaeton luxury saloon, competing against the Mercedes E-Class and the BMW 5 Series, will not be developed any time soon.
"It won't come in this decade," a spokesman for the company said, confirming a Tuesday report in the German newspaper Wolfsburger Nachrichten.