Batuk Gathani

Brussels , July 16

THE strike at Mercedes Benz plants — Germany's prestigious and largest luxury car manufacturer - has raised many eyebrows in European business and financial circles, as Germany's current labour problems look compounded and more complicated.

Ostensibly, the Mercedes Benz strike is about German workers protesting at company's drive to cut labour and production costs and management has proposed longer working hours, with no parallel rise in wages. Hence, tens of thousand of Daimer-Chrylser workers disrupted auto production across Germany and just walked out at several key manufacturing plants.

They protested at "strong-arm" cost cutting techniques pioneered by Mercedes Benz's parent the German-US auto manufacturer Daimler-Chrysler. More than 60,000 workers took part in anti-cost cutting demonstrations this week. The current dispute is latest flare-up between series of recent labour strife between German industry and work force. According to observers, the latest dispute could have a cataclysmic effect. Large global oriented German manufacturing companies prodded and worried by global competition and sensing weakness in German trade unions - whose membership is at a record post- war low are pressing German workers to accept longer working hours and less social and welfare benefits for the same wages.

There is eerie nervousness all round as German private investors are also seen deserting equities or buying stocks in German companies. A net Euro 1.5 billion flowed out of German equity funds in the three months to end June and there has not been a negative outflow from German equity funds since 1986. Germany has 4.2 million workers unemployed and German trade unions obviously are battling to halt German jobs being "exported" to low-wage economies in Eastern Europe and Asia.

Simultaneously Chancellor Schroeder's coalition Government is seen making desperate attempts to erode the extremes of German welfare state under "Agenda 2010" - a bold economic and social reform programme to cut German labour, welfare and pension costs. Germany's labour costs are highest in the world. Hence, German companies are desperate to maintain their competitive edge in the global market place.

The German companies are also facing adverse trading conditions on the home front. For example, sales at Mercedes Benz declined 3.4 per cent in first half of 2004 and the company is proposing to cut labour costs by $615 millions a year. The workers at Mercedes Benz have negatively responded by offering to co-operate with only $200 million or less than one third of the proposed $ 615 million cuts.

The company is proposing to shift production of new models to its South African subsidiary but the company has yet to take a final decision on such a strategic move. According to an observer, Mercedes plant in India is rated as "not elaborate and sophisticated" enough to shift part production of new models in India.

Mercedes Benz, currently rated as the world's No. 1 luxury car manufacturer could lose this position to its archrival BMW if the current cost cutting drive and labour dispute are not resolved amicably. The current dispute is rated as the largest in the company's post-war history. It remains to be seen if current dispute will be settled in company's favour.

The company has advantage of shifting its production to overseas markets and hence, workers may be obliged to comply in Germany's tough economic climate of high unemployment and slow down of investment flows. Major German companies ranging from Bosche to Siemans are engaged in similar cost cutting exercises at varying scales because German's traditional competitive edge in the global market place is at stake.

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