Deutsche Telekom determined to go ahead with job cuts

Deutsche Telekom AG, whose plan to move 50,000 service workers in Germany to jobs with lower pay sparked the company's biggest strike in a decade, will stick to its schedule to complete the transfer by July 1.

Submitted by Ed on May 26, 2007

Taken from

Deutsche Telekom told its fixed-line workers today that they will move into three separate entities under Deutsche Telekom's T-Mobile customer service and the Vivento Technical Services units, Chief Financial Officer Karl-Gerhard Eick said at a televised press conference in Bonn today. Under the revised plan, employees will take smaller pay cuts in return for fewer guarantees that they won't be fired. About 20 percent of the company's workforce will be affected.

Deutsche Telekom's latest step "exacerbates'' the conflict with Ver.di and leaves no room for further negotiations, union spokesman Ado Wilhelm said by telephone today. The strike will extend into its third week, he said.

As many as 15,000 workers each day have gone on strike since May 11 to protest against the transfer plan. The strike is hurting Chief Executive Officer Rene Obermann's efforts to revive earnings partly by cutting annual personnel costs by as much as 900 million euros ($1.2 billion) by 2010.

The strike must end soon because it risks undermining the future of Deutsche Telekom, Europe's largest phone company, Peter Struck, leader of the Social Democratic Party's group in parliament, told Deutsche Presse-Agentur yesterday. The German state owns 32 percent of Deutsche Telekom.

Revised terms
"We still want to find a consensus'' with Ver.di, Germany's biggest worker union, said Thomas Sattelberger, the Deutsche Telekom board member in charge of personnel. ``We're ready for further negotiations.''

Under the revised transfer plan, fixed-line call-center operators will move to Deutsche Telekom Kundenservice GmbH, a new company set up under the T-Mobile wireless division, and will take a 9 percent pay cut.

Remaining workers, involved in activities such as cable installation and technical services, will transfer to Deutsche Telekom Technischer Service GmbH and Deutsche Telekom Netzproduktion GmbH. These workers will be put under the company's Vivento employment agency unit, and will earn 2 percent less.

Before Ver.di broke off from a fifth round of negotiations, Deutsche Telekom on April 17 demanded that workers' salaries be cut as much as 12 percent and the working week increased to at least 38 hours from 34 hours. In return, under that offer, workers would be promised no job cuts through the end of 2010.

"Never before has a DAX company made such brazen attempts to impair workers' salaries and employment terms while at the same time paying 3 billion euros in dividends to its shareholders,'' Ver.di said in a statement.

Customer loss
Deutsche Telekom's first-quarter profit fell 58 percent as the loss of German fixed-line customers accelerated. Obermann has repeatedly said he may sell the company's service division if no agreement is reached with union leaders.

Deutsche Telekom employs more than 247,000 workers worldwide, a quarter more than France Telecom SA, the French former monopoly. Sales per worker were 8 percent less than at the French rival in 2006. About 100,000 employees work at the T- Com fixed-line unit, Deutsche Telekom's largest division by number of employees.

Obermann aims to lower Deutsche Telekom's annual costs by as much as 4.7 billion euros by 2010. Personnel costs account for 900 million euros of the budget. By the end of next year, Obermann is due to complete a 32,000 job-cut program started by his predecessor Kai-Uwe Ricke.

Shares of Deutsche Telekom rose 9 cents, or 0.7 percent, to 13.41 euros in Frankfurt. The stock has gained 8.8 percent in the past year, lagging behind a 36 percent increase by Germany's benchmark DAX Index.

To contact the reporter on this story: Kenneth Wong in Berlin at kwong11[AT]

Previous reports
Deutsche Telekom strike continues despite government intervention
Disruption in first week of Deutsche Telekom strike
Over 10,000 Deutsche Telekom workers walk off the job