Photographer: Krisztian Bocsi/Bloomberg

German Manufacturers Brace for Strikes on Deadlocked Wage Talks

  • IG Metall threatens 24-hour walkouts if no deal is reached
  • Negotiations in Baden-Wuerttemberg ended without result

Daimler AG, Siemens AG and other German manufacturers face potential production halts after failing to make progress in a contract dispute over wages and work hours with the country’s most powerful union.

IG Metall, which represents 3.9 million workers, will meet Thursday to discuss the state of negotiations after talks ended Wednesday without a deal. The union, which has rallied more than 900,000 people across Germany for hour-long protests in recent weeks, has threatened to intensify pressure on employers by calling day-long walkouts that would have a much more disruptive impact.

Negotiations on Wednesday in the state of Baden-Wuerttemberg ended around 10 p.m. local time without a result, according to the IG Metall union’s regional unit and employer organization Suedwestmetall. The talks were the start of the fourth round of negotiations. Emboldened by robust growth and record-low unemployment, the influential union is pushing employers to raise pay 6 percent and subsidize wages for workers who reduce hours to care for kids or older family members.

“IG Metall might have the will to reach a deal as well, but the current price tag is just too high,” Stefan Wolf, Chief Executive Officer of car-parts maker ElringKlinger AG and Suedwestmetall’s top negotiator, said in a separate statement.

The failed talks in the German state where industrial giants like Daimler, Robert Bosch GmbH and sportscar maker Porsche AG are headquartered herald a critical stage in the labor dispute. IG Metall’s bargaining committees will evaluate the situation on Thursday, and the union’s board plans to decide on Friday about next moves. 

Opposing Positions

Worker DemandsEmployer Stance
  • 6 percent pay increase
  • 28-hour work weeks to care for family
    • 200 euros/month or 750 euros/year to offset lost wages
  • Right to return to full-time hours
  • 2 percent pay increase
  • Rejects subsidies for shorter hours as illegal
  • More flexibility to extend hours

To read more about Germany’s wage negotiations, click here.

Policy makers from governments to central banks are watching closely. Aside from the short-term disruption from potential shutdowns, economists are concerned about the longer-term impact of wage stagnation. If the region’s most prosperous country can’t increase pay, others may face an even greater hurdle. That would complicate the European Central Bank’s efforts to boost inflation and eventually unwind stimulus measures.

While labor leaders want a sizable pay raise as well as more work-life balance for staff, employers worry about keeping production lines running amid an increasingly tight market for skilled workers.

Labor Bottleneck

German companies are increasingly having to hold back production due to lack of workers

Source: European Commission survey

IG Metall, which typically has the potential to set higher demands than other unions given the importance of Germany’s industrial sector, has been in talks with employers since it laid out its request in October for more pay and an option to receive subsidies for reduced working hours to take care of family.

For companies, the problem is that an already tight labor market makes it difficult to agree to workers’ requests for more free time. IG Metall has requested that workers be allowed to reduce their hours to 28 per week from 35 for two years and have the right to return to full time. Employers want to end limits on the number of employees that can work longer.

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