Bloomberg News

German Steelworkers Win 3 Percent Pay Rise in Shrinking Industry

March 06, 2013

Germany’s IG Metall union won a three percent wage increase for 75,000 workers in the steel and iron industries under a deal struck early this morning after 10 hours of negotiations.

The wage contract, which includes retirement and vocational training concessions for workers in the states of North Rhine- Westphalia, Lower Saxony and Bremen, takes effect this month and runs through May 2014, according to an e-mailed statement from IG Metall’s Dusseldorf chapter.

The wage increase, lower than the five percent the labor union originally sought, comes as steelmakers grapple with surplus capacity caused by dwindling demand from the auto and construction industries in Europe and competition from China. Steel trader Kloeckner & Co. (KCO) today posted a loss of 198 million euros ($259 million) for 2012, compared with a 10 million-euro profit the year earlier, as it presses ahead with a plan to eliminate more than 1,800 jobs, or 16 percent of its workforce.

“This is a moderate deal in the context of the difficult situation of the industry which allowed a bit more give-and-take by the labor union than in other industries,” Ingo-Martin Schachel, an analyst at Commerzbank AG, said by phone from Frankfurt.

Under the terms of the agreement, the quota of employees eligible for semi-retirement will rise to 5 percent from 4 percent with a higher inflation adjustment, and trainees will receive bigger employment contributions to their pension plans.

“All in all, it’s a fair, reasonable solution,” Knut Giesler, the regional head of IG Metall in North Rhine- Westphalia, said in the statement. “Three percent more with immediate effect is a good result.”

Biggest Union

IG Metall is Europe’s biggest industrial union with 2.3 million members at the end of 2012.

The wage increase is lower than demands by the public sector and the construction and metal industries, which are seeking 5.5 percent to 6.6 percent in this year’s round of talks. IG Metall’s board, which is scheduled to set its wage demand on March 15, is recommending its representatives seek up to 5.5 percent as they embark on wage negotiations for metalworkers later this month.

IG Bau, which represents about 750,000 employees in the construction industry, is demanding 6.6 percent.

Labor unions are seeking a share in Germany’s recovery as signs emerge that Europe’s largest economy is returning to growth after a contraction at the end of last year. The number of people out of work in Germany unexpectedly fell in February, by 3,000 to 2.92 million, according to data by the Federal Labor Agency last month.

The Bundesbank expects the economy to expand this quarter after contracting 0.6 percent in the last three months of 2012. Business confidence jumped to a 10-month high in February and investor optimism surged to the highest in almost three years.

To contact the reporter on this story: Tino Andresen in Dusseldorf at tandresen1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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