Cost-cutting deal signed at DaimlerChrysler

In late July 2004, the German-US car-maker, DaimlerChrysler announced an agreement that will safeguard 6,000 jobs at its plant in Baden-Wurttemberg and guarantee jobs in Germany until 2012 in exchange for concessions on working practices and planned pay increases, including a gradual increase in working time to 39 hours a week for services staff. The company had stated that, without such a deal, it would shift production of the new Mercedes C-class to sites in Bremen and South Africa. DaimlerChrysler managers will contribute to the savings by giving up part of their pay.

On 23 July 2004, after two weeks of protests by employees, brief work stoppages and bargaining with employee representatives, a cost-cutting deal was reached at DaimlerChrysler's Mercedes division that will save the German-US car-maker EUR 500 million a year in labour costs. These total annual cost cuts will become fully effective in 2007. In return for the imposition of new working practices, DaimlerChrysler, the world’s fifth-largest car-maker, will guarantee workers' jobs and incomes in Germany at least until the end of 2011.

The dispute centred on DaimlerChrysler’s home state of Baden-Wurttemberg, where company employees enjoyed better terms and conditions than those at other plants in Germany. A conflict was sparked after DaimlerChrysler announced plans - if workers did not accept cost-cutting measures - to shift production of its new Mercedes C-class and 6,000 jobs away from its main plant in Sindelfingen near Stuttgart, which employs 30,000 people, to Bremen (northern Germany) and South Africa in order to take advantage of lower labour costs at those two sites (DE0407106F).

The deal reached by management and works council in July affects around 160,000 employees at DaimlerChrysler’s German Mercedes division car plants, whose representatives have agreed to forgo a planned 2.79% wage increase in 2006. Additionally, 20,000 employees in all of DaimlerChrysler’s German development and planning departments have reportedly agreed to a 30- to 40-hour working time 'corridor' in order to save overtime pay for the company. In other words, in these departments, the paid weekly working time can be increased to 40 hours based on a supplementary agreement. The weekly hours in these departments had previously usually varied from 35 to 40.

Under the agreement, the use of temporary work will be restricted to 2,500 employees and the adaptability, in particular, of younger workers, new entrants and employees on fixed-term contracts will be increased. Over a period of three years, such workers can be employed at different sites within the company, depending on demand at those sites. Around 6,000 service and support employees who work in canteens, as security guards or in logistics, have agreed to increase their working week from the current 35 hours to 39 hours in gradual steps by July 2007 without additional pay. Service and support employees aged 54 or older will see a gradual decrease in their working week to 34.5 hours per week, without wage cuts. New service staff at DaimlerChrysler will be paid at rates similar to those for workers in the service sector, which are considerably lower than those in the metalworking industry. In exchange, workers' representatives won a concession from management to curb the outsourcing of these service jobs to outside contractors.

Paid hourly breaks for DaimlerChrysler workers in Baden-Wurttemberg will be reduced by roughly half. Workers will have to devote some of their break time to job training. Late-shift bonuses for work between noon and 19.00 will continue for current employees, but will be discontinued for new and temporary workers. In exchange for the employees’ concessions, DaimlerChrysler has agreed to reduce the salaries of 3,000 managers by an undisclosed amount, and of the company’s top executives by 10%.

According to the Mercedes chair, Jürgen Hubbert, 'the agreement sets the course for increased productivity and efficiency and so strengthens the long-term competitiveness of the Mercedes car group'. Erich Klemm, the elected head of DaimlerChrysler’s works council, which was advised in the talks by the German Metalworkers’ Union (IG Metall), said that 'management extracted cost cuts from us that hurt us a lot'. However, 'in the end the high price of roughly EUR 500 million was accepted' as 'the alternative would have been new confrontations every year about investment decisions, jobs and pay'. Decisive for the acceptance of the deal, according to Mr Klemm, was the fact 'that a secure job is extremely valuable in the long term'. IG Metall also welcomed the fact that 'the jobs at DaimlerChrysler are secure in the long term. The workforce has security about its income. Collective agreements are not broken.' Commenting on the deal, the union’s deputy leader, Berthold Huber, said that 'this result is a slap in the face for those who had been looking for a general extension of working hours and breaking collective agreements' (DE0312202F).

According to Gesamtmetall, the employers’ federation for the metalworking and electrical industries, 'the management of the company and the works council have found a suitable solution which is tailored to meet the needs of the company and which was guided by the collective agreement hammered out in February 2004 in the metalworking and electrical industries' (DE0403203F). Dieter Hundt, the president of the Confederation of German Employers’ Federations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA), made clear that in his opinion deals done by, for example, DaimlerChrysler to increase working hours without extra pay must be copied by other employers if Germany is to thrive: 'It is clear that our country as a whole must achieve more and work longer if we are to remain prosperous and retain our culture of social protection.' Moreover, he added: 'Collective bargaining only has a future in Germany if we find a new balance between [industry-wide] contractual pay agreements and deals struck at a company level'.

Chancellor Gerhard Schröder greeted the deal as 'victory for common sense' and expressed the hope that it would inspire success in current bargaining at Germany’s other major car group, Volkswagen.

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