VW to build SUV in Germany for lower wages

27 September 2005

WOLFSBURG, GERMANY – Volkswagen said Tuesday it would build its compact new sports utility vehicle (SUV) in Germany after labour leaders agreed to lower rates of pay on a separate production line.

Europe’s biggest carmaker had threatened to transfer the project to its plant at Palmela in Portugal where pay-scales are lower.

In a fresh blow to labour power, all 1,000 staff on one assembly line at the company’s giant Wolfsburg plant will receive learner wages to assemble the SUV, a high-slung, four-wheel-drive version of the VW Golf.

Volkswagen has dubbed the model the ‘Marrakesch’ in Germany but has yet to set its name for other markets.

The IG Metall trade union praised the deal, saying it had not budged over pay in Volkswagen’s main departments, but VW head of brands Wolfgang Bernhard warned “all the people who think this solves all Volkswagen’s problems” that the deal was just the beginning.

The company already builds another Golf derivative, the Touran minivan, at lower pay rates in Wolfsburg, but most of the site’s labour force are still receiving high wages won in the golden years before Volkswagen’s volume car business turned sour.

The company also announced it would build a coupe version of its larger Passat family saloon from 2008 at a plant in nearby Emden provided unions agreed next month to “optimize” pay costs there.

Germany’s caretaker economics minister, Wolfgang Clement, said the deal proved German labour could meet the challenge of globalisation.

Porsche, the German maker of SUVs and sports cars, announced Sunday it will seek a 20-per-cent stake in VW, which has been hit by weak sales in its main Chinese and German markets. VW’s largest shareholder currently is Lower Saxony state with 18.2 per cent.

Lower Saxony premier Christian Wulff, who has a board seat, denied Tuesday news reports that he was in a power struggle with supervisory board chairman Ferdinand Piech, who owns a large stake in Porsche and is widely believed to be behind the VW purchase.

Deutsche Bank, which had advised investors Monday to get rid of their Porsche shares, changed its mind Tuesday after a briefing from Porsche and rated the shares as worth holding.

“We’ve gained the impression that cooperation between Porsche and VW will be more involved than we thought at first,” said analyst Christian Breitsprecher.

Volkswagen stock rose 0.6 per cent to EUR 51.88 Tuesday on the Frankfurt Stock Exchange. Porsche preferential stock rose 4.5 per cent to EUR 635. All voting shares in Porsche are held by the Piech and Porsche families.

DPA

Subject: German news