View from City Road: German flexibility

Notwithstanding the considerable uncertainty about how much Volkswagen will really save through the four-day week to be introduced in January, the deal confirms an important trend in German industry. VW is the latest in a line of companies, such as Bosch, Bayer, Mercedes-Benz, and Opel, where the unions have had to accept some form of cutback in wages. Even if this has sometimes only been a reduction in voluntary wage supplements, or cuts in future increases, the unions are showing a degree of flexibility that breaks decisively with the rigidly high expectations nurtured during the booming Eighties and earlyNineties.

The same applies to working arrangements and machine running times, another vital area of German industry's productivity offensive. Germany is not a country of drastic and rapid changes. But it would be wrong for outsiders to misjudge apparently limited compromises as a sign that improvements are not occurring. There is now evidence everywhere that corporate Germany - management and unions - is well aware of its cost problems and trying to do something about it.

Ironically, despite all the publicity, VW's four-day week deal is probably the least satisfactory from a cost-saving point of view. Under political pressure - its biggest shareholder is the state of Lower Saxony - the company has largely deferred its problems. It says it has 20,000 too many workers regardless of whether the market recovers. This will continue to be a burden on a company desperate to reduce costs.