Schaeffler agrees deal with Union

Publication date: 24 February 2009

Schaeffler agrees deal with union

Schaeffler has pledged to give its workers some control over the company, in a move that has secured the heavily indebted German industrial group a new ally in its plea for a state bail out. Schaeffler on Monday agreed with IG Metall, the powerful German trade union, that the privately held company would allow workers to take part in strategic decision-making and to participate in stock offerings by the group. The manufacturer and car parts supplier, struggling under a €10bn ($13bn) debt burden from the takeover of its rival Continental, has for decades opposed giving its around 66,000 workers a say in strategic decisions. But with Monday’s move, Maria-Elisabeth Schaeffler and her son Georg, who co-own the company, are engaging in a desperate attempt to prevent a complete loss of control over the company.

Schaeffler has asked the state for several billion euros in credit guarantees as the group has difficulties meeting its interest payments in the wake of a drastic global slump in demand. The group’s banks are threatening to force Ms Schaeffler and her son to hand over control. Georg Schaeffler on Monday said Schaeffler would need between €5bn and €6bn in capital. The company is in talks with more than one possible investor on taking an equity stake in Schaeffler. “We will reduce our stake to help lower the company’s debt,” Ms Schaeffler added. Berthold Huber, IG Metall chairman, said the union was “fundamentally interested” in the Schaeffler family being able to remain as a “significant anchor investor” in the combination with Continental.

“We fear that … the banks would solve the problems to the disadvantage of the future of a Schaeffler/Conti group,” Mr Huber said, urging the state to help out. Several senior politicians in the German federal government have voiced strong opposition against a bail out of Schaeffler. Olaf Scholz, labour minister, said on the weekend: “We are not there to take the responsibility for wrong decisions of billionaires.” Schaeffler has bought more than 90 per cent in Conti, a rival three times larger, in an audacious takeover. But this backfired when Conti’s share price collapsed in the wake of the worst economic crisis the car industry has seen in decades. Ms Schaeffler has stepped up her lobbying efforts in recent weeks, arguing that state help would only be temporary and that a collapse of Schaeffler would have the same effect on the car industry as the demise of Lehman Brothers had on financial markets. Last week, Ms Schaeffler publicly broke out in tears when thousands of workers gathered for a show of solidarity in Herzogenaurach, where the group is based.

Source: Financial Times