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Company: DaimlerChrysler

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Board to agree pay cut in car row

Date Class
19th Jul 2004 Other Issue
German-US car giant DaimlerChrysler is offering to cut executive pay in order to end a dispute over cost cuts.

Staff at the firm's German plants have downed tools in protest at the plans to move jobs abroad unless 500m euros ($620m; 330m) in savings can be found.

But now the company says that its board members will accept a cut in pay if employees back down.

The move follows warnings from the German government that the dispute is hurting the country's economy.

German Chancellor Gerhard Schroeder told the Financial Times Deutschland that both management and unions had to be more flexible about working arrangements.

"Those who dig ideological trenches on this issue are making people nervous and therefore harming the economy," Mr Schroeder said.

The dispute revolves around DaimlerChrysler's argument that high pay and benefits for German workers are pricing it out of the market.

The company has found itself facing the heavy cost of discounting in the US, as well as bearing some of the cost of massive losses at Mitsubishi in Japan, in which it holds a 37% stake.

It is following the lead of other carmakers, some of whom want to return to a 40-hour week from the current 35 hours without increasing pay.

Now it is telling its workers that as many as 6,000 jobs could move from current plants, including a switch to South Africa, unless the savings are found.

Its proposals include cuts to evening and night pay as well as to workers' entitlement to breaktime.

The argument caused 60,000 workers to walk out on Thursday, and the refusal by another 10,000 to do overtime on the weekend delayed the assembly of about 1,000 vehicles.

German papers are speculating that the pay cut now suggested by DaimlerChrysler management could be 10%.

A spokesman refused to comment on the magnitude of the cut, but confirmed that a deal was on the table.

"The management board is prepared to make its contribution only if there is a successful conclusion in the negotiations with the works council," he said.

Employee negotiators said any such deal would have to be more than cosmetic if it were to be accepted.

"If the board is merely offering not to increase its income for one year, that's just ridiculous," said Erich Klemm, the top staff representative on the company's works council.




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