Volkswagen enters third round of wage talks as strikes loom

Adds opening statement from union

By Victoria Waldersee

WOLFSBURG, Nov 21 (Reuters) - Volkswagen VOWG_p.DE management and worker representatives begin a third round of wage negotiations on Thursday, with just ten days left to find a solution before unions have threatened strikes across German sites.

The talks are over wages for 120,000 of Volkswagen's roughly 300,000 staff in Germany, employed at six plants governed by a separate collective wage agreement to the rest of the workforce.

Volkswagen has demanded a 10% wage cut, arguing it needs to slash costs and boost profits to defend market share in the face of cheap competition from China and a drop in European car demand. It is also threatening to close plants in Germany for the first time in its 87-year history.

The troubles at Europe's largest automaker have fed wider anxieties about Germany's status as an industrial powerhouse in the run-up to a snap election in February where Chancellor Olaf Scholz's economic record is under scrutiny.

Unions on Wednesday proposed forgoing bonuses for two years and creating a fund to finance a temporary reduction in working hours in less productive areas of the business. They said these measures would avoid redundancies and save 1.5 billion euros ($1.6 billion).

The fund would be financed by a 5.5% wage increase for the workforce, which employees would place into the fund as an act of solidarity towards colleagues in areas of the business suffering from overcapacity whose jobs would be at risk. Unions did not provide details on how these savings would be generated.

But the proposal was contingent on management ruling out plant closures, which Volkswagen has refused to do.

"We have opened a corridor for today's negotiations... now it is Volkswagen's board's turn. We expect them to take this same constructive approach with us," said IG Metall union negotiator Thorsten Groeger.

"A solution before Christmas relies on the other side making a big step towards one today. We made a big step, and now we need a big step from the other side," he added, criticising Volkswagen's refusal to rule out plant closures.

If management rejects their proposal, unions - a powerful force at Volkswagen, controlling half the seats on its supervisory board - will demand a 7% pay rise alongside no plant closures.

If their demands are not met, workers will strike from Dec. 1 across German sites, the first large-scale strikes at the German business - VW AG - since 2018 when over 50,000 workers took to the streets over pay.

AUTOMAKERS STRUGGLING

The talks are taking place in Wolfsburg, where Volkswagen is headquartered. Thousands of workers are expected to gather in the Wolfsburg soccer stadium on Thursday morning.

"We welcome that worker representatives are signalling openness to measures on labour costs and overcapacity ... We will go into a detailed exchange in the negotiations to make a financial assessment of the suggestions," Volkswagen board member Gunnar Kilian said in a statement.

Company and industry data reviewed by Reuters this week showed that the automaker spends a higher proportion of sales on labour costs than its major rivals.

The data, in an internal memo by Volkswagen's works council, underscores the company's challenge to remain competitive.

But other automakers are also struggling.

Ford F.N said on Wednesday it would cut around 14% of its European workforce.

"The workforce understand the situation we are in, but does not condone that the company is suggesting this should be solved in a one sided manner," VW AG works council chief Daniela Cavallo said.

($1 = 0.9494 euros)

(Reporting by Victoria Waldersee; writing by Victoria Waldersee and Matthias WilliamsEditing by Bernadette Baum and Mark Potter)

((Victoria.Waldersee@thomsonreuters.com;))