VW avoids job cuts with 4-day week: Deal will save 20% on labour costs
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Your support makes all the difference.VOLKSWAGEN, Europe's biggest car maker, agreed yesterday with the IG Metall union to introduce a four-day week at its six German plants as a way of avoiding mass layoffs. After 14 hours of negotiations the two sides agreed to reduce working hours to 28.8 a week from 36.
Volkswagen claimed the deal would save it about 20 per cent in labour costs. The union said the annual wage losses suffered by workers would be limited to less than 10 per cent. IG Metall said Volkswagen has given an employment guarantee for the 31,000 workers threatened with layoffs.
The Frankfurt Stock Exchange reacted euphorically to the news and VW stock closed up DM9.50 (pounds 3.80) at DM412. Analysts were more sceptical, arguing that the claimed DM1.8bn annual savings over 1994 and 1995 are much less. 'They have done the old trick of cutting future payments and claiming them as current savings. The reality is that VW's unit labour costs have gone up and the price of short-term savings will be a serious long-term burden,' said Joachim Bernsdorff, senior analyst at Societe Generale in Frankfurt.
The current savings in the complex deal come from not paying a 3.5 per cent wage increase due on 1 November of this year, and reductions in voluntary bonus payments. Future savings booked as already made will come from paying a wage rise of just 1 per cent in January 1994.
VW also nominally brought forward the 35-hour working week, scheduled for 1995, and counted that as a saving. By spreading annual bonuses over the year, the union managed to keep unchanged the VW workers' monthly pay cheque, even though the annual wage bill will be reduced by 10 per cent. Analysts calculated the effect of savings achieved by Volkswagen as between DM1.2bn and DM1.3bn.
Far from the victory claimed by VW, the four-day week underlines the strength of the unions at a company where the main shareholder is the state of Lower Saxony.
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