VW, Unions OK 20% Reduction in Workweek
In the most dramatic evidence to date of Western Europe’s grim economic prospects, Germany’s largest auto maker, Volkswagen AG, on Thursday announced an agreement with trade unions to implement a four-day workweek from the start of next year.
Company officials said the plan, which constitutes a 20% reduction in working hours for VW’s 100,000 employees, was envisioned for an initial period of two years.
The accord was reached early Thursday after marathon negotiations with representatives of Germany’s largest trade union, IG Metall. It is expected to save the company almost $1 billion in wage costs annually. The deal will also help stem the auto maker’s losses, which in the first nine months of 1993 totaled more than $900 million.
Had the five days of talks failed, VW said it would have been forced to lay off an estimated 30,000 employees. “We managed to find a reasonable solution,” summed up Volkswagen’s chief negotiator, Jochen Schumm.
Like many European auto producers, Volkswagen has suffered a sharp drop in sales in the first nine months of 1993, and, with the economies of most European countries struggling to shake off one of the deepest recessions of the post-World War II era, prospects for any immediate turnaround appear remote.
Thursday’s agreement comes at a time when economists and industrialists in several European countries are studying the feasibility of implementing a four-day workweek as a way of containing the rise in unemployment in stagnating sectors and generate new jobs in healthy industries. The idea is now a subject of serious political debate in Western Europe’s two largest economies: Germany and France.
While Volkswagen officials said they had no intention of setting a broader precedent in cutting the workweek to four days, they admitted that it could end up that way. “We’ve worked out a VW model, not a model for German or European industry,” stressed company spokesman Peter Schlelein. “But what we have done has generated a lot of interest. We’ve had calls today from all over Europe.”
The Volkswagen accord reduces the employee workweek by one-fifth from 36 hours to 28.8 hours. However, through a series of benefits trade-offs, including the giving up of extra vacation perks and future wage increases, the immediate drop in workers’ wages is expected to be only about 10%.
Tyll Necker, the head of the Assn. of German Industry, swiftly rejected the formula as a model for German industry, claiming a four-day week only makes sense if it is accompanied by a reduction in wages of at least 20%.
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Unemployment is increasingly viewed as one of the region’s most pressing problems, which could bring serious social unrest if new, inventive measures are not considered. The jobless rate now runs at about 11% in the 12 nations of the European Community.
Aside from Volkswagen, for example, other blue-chip companies in Germany are also ailing, including the giant Daimler-Benz group, which recently announced plans to cut 51,000 employees from its work force by the end of next year. IBM’s German subsidiary also plans to cut almost 10,000 jobs over a three-year period ending in 1995.
The economic consequences of unemployment for European governments are considerable.
Because the majority of these countries are social democracies that offer liberal unemployment benefits, the present recession has had a crippling impact on national budgets and attempts to reduce spending is another source of potential social unrest.
Spain’s largest trade unions, for example, are threatening a general strike over proposed government measures that include cuts in maximum unemployment benefits and pensions, while a strike in Belgium this week brought transportation, banks and many industrial companies to a halt as workers protested against a government austerity package that includes a three-year wage freeze, tax increases and cuts in social security spending.
