Volkswagen labour union proposes salary concessions to avoid lay-offs

Labour groups at German automaker Volkswagen (VW) have proposed forgoing salary in order to avoid threatened plant closures and mass lay-offs in Germany amid a major cost-cutting programme proposed by management.

The IG Metall trade union and the Volkswagen works council on Wednesday laid out the proposal to reduce labour costs by about €1.5 billion ($1.6 billion) ahead of the next round of collective bargaining talks with Volkswagen management.

In return, the union and the works council demanded that the company guarantee job security and the future of Volkswagen's nine German plants.

They also signalled openness to flexibility around staff working hours, if that meant avoiding job cuts. The proposal would involve putting scheduled salary increases into a future fund instead for a limited period of time.

Volkswagen management reacted cautiously on Wednesday, saying that the proposal would need to be carefully evaluated financially first and that they anticipate "a more detailed exchange" at collective bargaining talks on Thursday.

"First of all, we welcome the fact that co-determination is signalling openness to measures for labour costs and capacity adjustments," Volkswagen's Gunnar Kilian, an executive for human resources, said in a statement. "Any suggestion that contributes to achieving our goals will help."

Kilian, however, said that plant closures cannot be ruled out since Volkswagen's focus is on achieving financial targets and remaining competitive.

"The proposal submitted must be measured by whether it offers concrete and sustainable solutions that both secure the economic stability of the company and credibly protect the future of the workforce," he said.

Volkswagen management cancelled a decades-old job security deal in September, warning that disappointing financial performance at the brand could necessitate major job cuts. Management has also reportedly sought a 10% across-the-board pay cut for its German workforce.

Labour representatives have vowed to stage massive resistance to any closures or mass layoffs.

"Because sustainable solutions are needed, we are now going on the offensive and presenting a solution concept," said works council chairwoman Daniela Cavallo at the presentation of the concept in Wolfsburg. "It is a counter-model to the board of management's plan to cut jobs, which prevents the future instead of creating it."

The works council's own plan, on the other hand, "does not involve plant closures or compulsory redundancies," said Thorsten Gröger of the IG Metall trade union.

Cavallo spoke of a "master plan that ensures the company's long-term future viability."

She said that labour groups at Volkswagen are not fundamentally opposed to staff cuts, but insist that any cuts be carried out in a socially responsible manner.

Cavallo also insisted that management should waive bonuses and contribute a portion of their wages to secure the future for the company as well.

"It is now up to VW to also take responsibility and facilitate swift solutions," said Gröger.

A failure by company management to engage would "deliberately provoke an escalation," which Gröger said the trade union hopes to avoid by reaching a deal before Christmas.

"But we are equally clear: the workforce is ready to fight and preparations are under way," he said.

A mandatory labour peace which prevents strikes or other labour action expires at the end of the month.