Q&A: Background to wage dispute

Hodson outside a Mercedes car plant which is taking part in the industrial action

STUTTGART, Germany -- Germany's most powerful union, IG Metall, has begun its strike action calling for higher pay.

CNN's Charles Hodson joined strikers outside a Mercedes plant near Stuttgart, and explains the background to the strike.

CNN: We are talking about a 0.7 percent pay difference between the two sides. Why have they failed to agree to a deal, and are there other factors involved?

Hodson: Although the union is reported to have been prepared to lower its pay demand to four percent, it is officially still asking for 6.5 percent -- which leaves a difference of 3.2 percent between that and the employers' 3.3 percent.

Two things are behind the strike action. First of all, there is the pay demand, but secondly, the union wants a new pay structure.

Essentially, it says people are doing the same job in the same company but not receiving the same level of pay. Some are regarded as workers and others as employees.

It is a linguistic distinction based on whether you have worked your way up from the shop floor or go in as a white collar worker. However, this is not the key issue.

The main argument is that they have had a modest pay rise when the industry has been going quite strong, especially relative to the rest of Germany. People have certain expectations which they expect to be fulfilled, despite seeing that the country is only just emerging from a recession.

They argue that their pay demands during the past couple of years have been moderate after striking a deal with employers, but that high inflation has eaten into their restrained increase.

The employers' line is that anything beyond 3.3 percent (which was their last offer) would put incredible pressure on companies. Small suppliers may fall victim, for example, one job in six is dependent on the car industry in Germany.

MORE STORIES • Germany hit by strike action

Another argument is that more than 3.3 percent could be inflationary. For example, the European Central Bank and the Bundesbank will be worried about anything more than 3 percent. Because the industry is very important it is almost like a virility symbol of the union movement, and it will not accept anything less than any other union movement.

The strike will be watched very carefully. If 2.7 million members of the IG Metall union get 4 percent there will be a lot of pressure for people in other industries to receive more than 3 percent.

CNN: How powerful is the union, and how likely are its chances of success?

Hodson: It is very powerful. Any body that has 2.7 million members is a significant proportion of the national workforce. You are talking about one in 15 workers belonging to it. It is a heavyweight as far as the labour union movement is concerned. It has been a factor in getting such high wages for German workers.

But productivity levels are fantastically high because of their skills. Workers are to a large extent worth it -- if they weren't the jobs would go overseas. People are still willing to pay a premium for a car made in Germany.

The one-day-a-week strike could be more damaging than a lengthy all-out strike -- it is easier to maintain. Also if it was an all-out strike there would be more pressure on workers, from their families over monetary concerns, for example.

CNN: How long can the union hold out?

Hodson: As far as the strike is concerned the pain that may be suffered by the workers must be limited because it has been structured so they only have to take one day off in five -- they will only lose one-fifth of their pay.

They could very easily continue for some weeks. Union leaders are keeping their cards close to their chests though, only saying they will keep the strike going for as long as it takes. The unions are in a strong position because the strike ballot had a high approval rate -- nine to one voted in favour in a high turnout.

CNN: Does the strike have any public or media approval?

Hodson: Well, people will not be directly affected by the strike so there will be a number of people who say it is fair because the industry is doing quite well and they have shown restraint -- may be it is pay-back time. The media has split along right-wing and left-wing views.

CNN: How might the strike impinge on Chancellor Gerhard Schroeder's hope for re-election in the summer?

Hodson: In terms of his image, he is suffering from not having taken action during his term, he is seen as having been a little impotent, so this will be help. The car manufacturing industry is huge in Germany so the impact could be big. But it is not a politically motivated strike. The union says it is neither for or against Schroeder.

It is also not socially motivated. There is no "fat cat" resentment among workers at big pay increases for the bosses as there has been in the UK -- because there aren't any. In a number of German multi-national companies the bosses get paid less than those in the U.S. units.

Also the tax structure is very progressive. The rhetoric used in the industrial action is strongly devoid of class warfare compared to the UK. There is no confrontational aspect to the strike -- it is a very grown-up one.