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