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Cablegate: Labor Showdown at Deutsche Bahn: More

VZCZCXRO1124
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHRL #1561/01 2271527
ZNR UUUUU ZZH
R 151527Z AUG 07
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC 9028
INFO RUEHC/DEPT OF LABOR WASHINGTON DC
RUEBBEA/DOT WASHDC
RUCNMEM/EU MEMBER STATES
RUCNFRG/FRG COLLECTIVE

UNCLAS SECTION 01 OF 02 BERLIN 001561

SIPDIS

STATE FOR DRL/ILCSR AND EUR/AGS; LABOR FOR ILAB
(BRUMFIELD); TREASURY FOR OASIA

SIPDIS

E.O. 12356: N/A
TAGS: ELAB ECON EFIN PREL PGOV GM
SUBJECT: LABOR SHOWDOWN AT DEUTSCHE BAHN: MORE
THAN JUST WAGES AT STAKE


ENTIRE TEXT IS SENSITIVE BUT UNCLASSIFIED. NOT
FOR INTERNET DISTRIBUTION

1. SUMMARY. The anticipated train strike in
Germany may have a long-lasting impact on labor
relations in this country, as it pits
longstanding constitutional rights to strike
against the judiciaryQs authority to defend the
national economic interest, and could ultimately
delay the governmentQs program to privatize and
recapitalize Deutsche Bahn (DB). Breaking with
German tradition, the railroad engineers union
(GDL) is seeking a separate collective agreement
for train drivers, as well as a major pay hike.
Following a court decision to prohibit a strike,
the two sides have submitted to mediation with an
agreement hoped for by the end of August. While
ostensibly about wages, the real issue behind the
dispute is a shift in the time-honored
relationship between management and labor in
Germany. A separate contract for GDL would
undermine one of the underlying principles of
GermanyQs collective bargaining system: one
industry, one company, one union - a principle
already under challenge from small unions
representing professionals and specialists. END
SUMMARY.

A DISPUTE ABOUT WAGES . . . AND MORE
- - - - - - - - - - - - - - - - - -

2. On the surface, the issue is simple. The
railroad engineers union, GDL, is threatening to
strike because of allegedly inadequate
compensation, and is seeking a pay hike of up to
31%. Yet in addition, GDL, in seeking the
adoption by DB management of a separate
collective agreement for train drivers, is
breaking with the tradition whereby workers in
huge and diverse industries negotiate common pay
increases. DB management has strenuously
resisted the unionQs demands for several reasons:
(1) a separate agreement would erode traditional
collective bargaining policy; (2) it could ignite
steep wage demands from other railway workers;
(3) it might scare away potential investors in a
newly privatized railway company; (4) if
sustained over a period of weeks, a strike could
disrupt GermanyQs just-in-time production and
export system, costing as much as 500 million
Euros (about $675 billion) a day, according to
some estimates.

3. On August 8, the Nuremberg-based labor court
appeared to side with management when it issued
an interim injunction ruling that a strike during
the peak travel period would damage the national
economy. The court banned strikes until the end
of September. Nonetheless, the court left open a
loophole allowing disruptions of city
transportation services operated by DB. The
union deftly exploited this on August 9 when
drivers idled suburban rail services in Berlin
and Hamburg for two hours during the morning
rush-hour. However, on August 10, DB and GDL
agreed to ask two former CDU politicians to serve
as mediators in an effort to settle the dispute.
GDL announced it would refrain from staging more
strikes until at least August 27, while DB agreed
in return not to impose any strike-related
penalties. After a first meeting with DB
management and union leaders on August 13, the
mediators stated their intention to seek a
compromise that was acceptable to both sides by
the end of the month, but warned against
expectations for a swift settlement.

BIGGER ISSUES THAN MONEY
- - - - - - - - - - - --

4. Aside from GDLQs demand for a substantive pay
hike, whatQs really at stake is a power struggle
over the future role and influence of railway
workers unions in the German rail system. In
addition to the 31% pay rise, GDL is seeking a
separate contract for its 16,000 members among

BERLIN 00001561 002 OF 002


the 20,000 train drivers. For years, union
members have pressured their leader Manfred
Schell to seek a separate contract. Schell has
stubbornly pursued this goal since 2003 but has
run up against equally stiff resistance from DB
CEO Hartmut Mehdorn. Many analysts believe
Schell, who is set to retire by next spring, sees
this as his final chance to leave a lasting
legacy. On the other hand, MehdornQs goal is to
move ahead with the privatization of DB, which
could be threatened by a prolonged strike. There
are also fears that the GDL precedent could lead
to other labor showdowns in the railway industry,
making DB stock even less attractive to potential
investors.

5. The dispute illustrates a growing shift in
labor market politics throughout Germany.
Comprehensive collective bargaining agreements
between unions and employersQ associations,
covering entire industries, were for years the
rule, ensuring a remarkable degree of labor
market stability. The system is starting to
break down: both unions and employers
associations are losing members, and the unions
find themselves having to negotiate contracts
that give individual firms greater flexibility to
meet the demands of global markets. The erosion
of industry-wide collective bargaining agreements
is taking place in all sectors of the economy,
and this trend has accelerated in the past two
years. Many such agreements now include Qopening
clausesQ allowing individual companies to deviate
from collective provisions. Industry-wide
contracts cover about 43% of all firms, but 51%
of firms (mostly smaller ones) have no collective
bargaining agreement at all.

COMMENT
- - - -

6. So far, the public appears supportive of the
train operators. Earning just 1500 Euros
($2,025) net income a month (plus overtime), a
German locomotive engineer with 40 years
experience earns little more than an entry-level
counterpart in France, and well less than his
counterpart in many comparable German industries.
Popular opinion could easily change, of course,
if the union carried out its threat to shut down
both freight and passenger traffic, effectively
paralyzing the economy and stranding passengers
at the height of the tourist season. Moreover,
it could set a damaging precedent, meaning that
each and every factory might have to negotiate
with scores of unions representing only a
fraction of any industriesQ workers -- a major
step backward from the traditional consensual
style of labor-management relations in Germany.

KOENIG

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