German Industry Losing Appetite for Labor Struggle

By Edmund L. Andrews, New York Times, 10 December 1996

[F] RANKFURT, Germany—German corporations, which only recently appeared to be spoiling for a fight with organized labor, are on the verge of crying uncle.

Less than two months after vowing to cut sick pay by 20 percent, a move that ignited waves of worker protests and brief walkouts by hundreds of thousands of workers, major business groups are now caving in to union demands and beating a fast retreat.

The trade association of banks and financial institutions announced on Monday that it would reverse an earlier decision to cut sick pay for 400,000 employees on its own and instead try to negotiate a new union contract.

Manufacturers of heavy equipment in at least one region agreed last week to preserve a full six weeks of sick pay at the current level, and employers in a major southern industrial region with more than 300,000 workers were considered likely on Monday to bow to union demands, too.

The issue of reducing, while not in itself crucial to Germany's economic prospects, has become a bellwether of the broader campaign by corporations in this country to trim back a relatively generous web of fringe benefits and worker protection. The retreat by German business suggests that the campaign is not going well.

In the last few weeks, union leaders have demonstrated their ability to bring considerable pressure against employers with a variety of go-slow tactics that stop short of strikes yet cause considerable pain.

At banks and insurance companies, for example, unions have refused to authorize overtime or to allow their members to work beyond their standard shifts in any way.

In the machinery and automobile industries, the metal workers' union has staged walkouts, boycotted Saturday shifts, and kept most of its members working according to the letter of their contracts and not one minute more.

That type of action has had a powerful effect, and has tended to split many employers into opposing camps. Machinery and metals companies have been split between those who are still enjoying robust exports and need to work at full speed, and others more determined to push for immediate concessions from the unions.

Daimler-Benz, the parent company of Mercedes, has lost tens of millions of dollars as the result of one-day strikes, protests, and refusals by its main union to permit Saturday shifts.

German companies are not the only ones being blocked by unexpectedly tough union responses. Less than two weeks ago, a strike by truck drivers in France all but closed the country's borders until the government capitulated to virtually all demands on wages and benefits by the drivers.

The sick-pay issue has been viewed by all sides in Germany as a crucial test of wills. In October, many big corporations announced plans to quickly apply a new law that reduced the minimum sick pay employers must offer to 80 percent of pay for six weeks, from 100 percent.

The new law did not order companies to change their policies on sick pay, but Daimler-Benz and others announced plans to apply the law even where union contracts were still in force. However, most of them backed off after widespread protests involving hundreds of thousands of workers. A bitter spate of bargaining has been going on in fits and starts since.

Last week, the metalworkers' union won its first big victory by reaching an agreement in the state of Lower Saxony, where Volkswagen is based. Sick pay was retained at the existing level in exchange for concessions on vacation pay and other issues.

In Germany, collective bargaining generally results in pattern agreements for sectors of business, rather than for individual companies.

Gesamtmetall, the trade association for companies involved in metalworking and machinery trades, denounced the agreement in Lower Saxony over the weekend, with the association's chief, Werner Stumpfe, calling it very disappointing.

Nevertheless, more companies in the trade association appear to be breaking ranks. The metalworkers' union was in talks on Monday with employers in the southern state of Baden-Wuerttemberg, home of several Daimler-Benz plants, and they appeared to be on the verge of their own agreement to preserve sick pay at the current level.

Wolfgang Scherermet, a labor economist at the German Institute for Economic Research in Berlin, predicted that the agreement in Lower Saxony would set the tone for deals elsewhere. In large part, he said, the companies that make up German trade associations were far less united than might have appeared. Export-oriented companies, which have been helped in recent months by the decline of the mark against the dollar, have been more eager to reach labor settlements.

The companies are not as close to each other as the unions are, Scherermet said, and sick pay was an issue that many of them did not want to get into a conflict over.

Having given ground in the battle over sick pay, many German companies are now hoping to persuade unions to make concessions on workplace flexibility, vacation pay, and other issues.