Volkswagen Resumes Wage Negotiations

Volkswagen AG (search) resumed crucial wage talks with its workers Tuesday, with the two sides haggling for nine hours over the automaker's push for a two-year wage freeze in return for a no-layoff pledge.

The session ended without a deal and new talks were set for Oct. 12.

Tuesday's talks followed an initial session Sept. 15 that failed to narrow differences between the two sides. The bargaining covers 103,000 workers at six German plants, but the company's no-layoff offer would include all 176,000 German VW workers.

The IG Metall (search) union's chief negotiator, Hartmut Meine, said on his way out that the company was continuing to press its demands, which also include a proposal to higher new workers at lower rates.

The two sides still hadn't agreed on how to guarantee jobs, which Meine called "the key question." To press that point, several hundred workers demonstrated outside the talks in Hanover.

Company negotiator Josef-Fidelis Senn said earlier that "we are ready to negotiate with IG Metall about it" but stressed the company's goal to cut labor costs by 30 percent by 2011. Volkswagen says it can't afford the 4 percent annual increases demanded by the union.

Volkswagen typically gets along with its unionized work force, and the two sides have cooperated for years in coming up with flexible working arrangements to preserve jobs. But the company's recent woes have put pressure on that cozy relationship.

The automaker's earnings have sagged as it confronts stronger competition from Japanese auto makers, fierce price competition in the North American market, and sluggish consumer demand at home.

It has had to soften its longtime opposition to discounting in order to prop up German sales of its mainstay Golf hatchback, now offering cheaper options packages after first stimulating sales with a free air conditioning incentive.

The company has not matched deep price cutting by its competitors in North America, costing its sales and profits. Volkswagen says the practice hurts customers by undermining resale values.

The company saw net profit fall 36 percent in the first half of the year to euro383 million (US$467 million) from euro596 million in the same period last year, and cut its profit estimate for the full year.

It now expects to make euro1.9 billion (US$2.3 billion) in operating profit before special items, instead of euro2.5 billion (US$3 billion). Operating earnings exclude financial items such as interest and taxes, and one-time charges and gains.