Volkswagen labor warns Porsche talks may collapse

FRANKFURT Mon Aug 4, 2008 7:28am EDT

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FRANKFURT (Reuters) - Volkswagen's (VOWG.DE) senior labor leader warned that talks to agree on workers' rights in Porsche's (PSHG_p.DE) new SE holding company are in danger of collapse if VW's future owner does not compromise on key issues.

Responding to accusations from his Porsche counterpart that VW labor was blocking a deal, Bernd Osterloh said Zuffenhausen-based Porsche aimed to create a two-class system in which 12,000 Porsche employees outranked VW's massive workforce.

"If the 360,000 men and women working in the Volkswagen Group were of the opinion that a labor contract has to be terminated, Porsche representatives in the holding's works council could then prevent this, according to the plans in Zuffenhausen," he said in comments sent to Reuters.

An ongoing battle over a law that grants the state of Lower Saxony special status as VW shareholder and frosty relations between VW's highly organized workers and Porsche Chief Executive Wendelin Wiedeking are seen as the last main obstacles to a successful integration of Volkswagen into Porsche SE.

Germany's system of co-determination gives labor a large say in how big companies are run, so takeovers here often have to be friendly in nature in order to work.

Apart from his duty as Volkswagen works council boss, Osterloh plays an important role at the world's fourth-largest carmaker since he sits both on the supervisory board and its powerful six-man steering committee, along with Wiedeking.

"In mid-August, the European works council will discuss whether further talks with the goal of reaching an agreement appear sensible. Porsche finally has to budge," he said, adding he was no longer certain if Porsche wanted an agreement.

"We are going in circles. There is no consistent line at Porsche. We want the VW workforce to have an appropriate presence in the co-determination committees of the Porsche SE."

Porsche was not immediately reachable for a comment but it has said that the current deal, signed in June of last year and valid for 10 years, is not up for renegotiation.

Osterloh said Porsche's imminent takeover of Volkswagen -- which will grant the Porsche and Piech clans control of a global automotive empire -- had been complicated after Porsche's management "needlessly poisoned" relations with VW's workers.

Should talks collapse over a deal governing co-determination at the Porsche holding company, the VW works council boss renewed his threats to exhaust all possible legal options to force a renegotiation of the contract.

INTENDED WEAKENING

This may include filing a lawsuit when Porsche has expanded its 31 percent voting stake in Volkswagen to a majority, which could happen as early as next month.

"Under SE law (for European companies or "Societas Europaea"), there is a provision stipulating new negotiations with employees over co-determination in the case of a so-called structural change," Osterloh told Reuters.

"We believe that when a corporation with 360,000 employees is integrated into a mid-sized company that barely has a staff of even 12,000, then that should be a good enough reason to hold new talks about the rights of the workers."

The Volkswagen labor leader also disputed claims from Porsche works council boss Uwe Hueck and finance chief Holger Haerter that Osterloh was not allowed to reach a deal, since VW deputy chairman and former IG Metall union boss Juergen Peters was embroiled in his own backroom game of power politics.

"We are really starting to wonder just how desperate Porsche is looking for a scapegoat to conceal their own failure," he said.

Osterloh blamed Porsche management and labor for striking the deal on co-determination at the holding company that intentionally weakens VW workers' interests over the objections from senior union leaders and his own works council.

He said IG Metall boss Berthold Huber, VW deputy chairman Peters and himself all thought the current deal contained "grave deficiencies", dismissing suggestions by Porsche that divisions had emerged within the union over Peter's role in the conflict.

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