Crunch Time For Germany's Unions

German workers now earn more pay and benefits for less work than any others in the world. They can thank Franz Steink uhler for that. As the charismatic chairman of Germany's biggest labor union, the 3.3 million-member IG Metall, since 1986, he led the fight for a 35-hour week and higher wages. Battling employers in good times and compromising in bad, he was the epitome of the modern labor leader.

Now, German workers have to find a new champion just when they're in the hot seat. Steink uhler resigned from his union post on May 25 because of share trades tainted by a suspicion of insider dealing.

His abrupt departure comes at a critical juncture for the labor movement in Germany. Unions are still trying to push claims for pay parity between east and west German workers. IG Metall, for instance, recently called 70,000 east German members on strike for 26% pay raises. The unions are also part of an effort to forge a new social compact with management and government to restore lost competitiveness to Germany's $2 trillion economy. Chancellor Helmut Kohl would like to see the unions trade moderation on wages and work rules for job security.

WEAKER LEFT. It is still to be seen whether Steink uhler's departure will make these negotiations easier. On one hand, his absence--along with the recent resignation of Social Democratic Party leader Bj orn Engholm--has weakened the left. That helps Kohl push measures the left opposes, such as raising personal taxes to cut budgets while reducing levies on business to stimulate a recovery.

Other big German unions, such as those of chemical and public-sector workers, are already accepting real wage freezes. But IG Metall has been hanging tough. And its probable new leader, Klaus Zwickel, a chief wage bargainer, may feel the need to slow things down in order to prove himself. Says Zwickel: "This is a struggle about Germany's social and political future."

It was in part Steink uhler's ability to talk to management that may have been his undoing. Under Germany's co-determination system, unions hold about 30% of seats of the supervisory boards of big companies. Steink uhler was deputy chairman of Volkswagen and a member of the Daimler Benz and Thyssen boards. It was his trading in shares of Mercedes Automobil Holding and Fokker ahead of price-sensitive moves by Daimler's board that toppled him. Steinkuhler turned over his profits on the trades to IG Metall strike funds and denies any wrongdoing.

But even apart from a conflict of interest, it doesn't go down easily with the rank and file when its leaders own shares of companies in the midst of layoffs. Mercedes is cutting its work force by nearly 30,000 over two years. But big companies aren't likely to take advantage of this moment to beat up unions. With one-quarter of Germany's manufacturing base destined to flee abroad by the end of the century, industry needs labor leaders of Steink uhler's former stature to broker changes. Only unions can sell painful restructuring as the price of continued high wages and a broad social safety net.

        -- Workers will trade wage moderation for job security
        -- Union cooperation with the government on new social compact
        -- Rules for union directors on boards will tighten
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