by BLOOMBERG

FRANKFURT • Daimler AG, Siemens AG and other German manufacturers face potential production halts after failing to make progress in a contract dispute over wages and work hours with the country’s most powerful union.

IG Metall, which represents 3.9 million workers, would meet yesterday to discuss the state of negotiations after talks ended on Wednesday without a deal. The union, which has rallied more than 900,000 people across Germany for hour-long protests in recent weeks, has threatened to intensify pressure on employers by calling day-long walkouts that would have a much more disruptive impact.

Negotiations on Wednesday in the state of Baden-Wuerttemberg ended around 10pm local time without a result, according to the IG Metall union’s regional unit and employer organisation Suedwestmetall. The talks were the start of the fourth round of negotiations. Emboldened by robust growth and record-low unemployment, the influential union is pushing employers to raise pay 6% and subsidise wages for workers who reduce hours to care for kids or older family members.

“IG Metall might have the will to reach a deal as well, but the current price tag is just too high,” Stefan Wolf, CEO of car-parts maker ElringKlinger AG and Suedwestmetall’s top negotiator, said in a separate statement.

The failed talks in the German state where industrial giants like Daimler, Robert Bosch GmbH and sport-scar maker Porsche AG are headquartered herald a critical stage in the labor dispute. IG Metall’s bargaining committees would evaluate the situation yesterday, and the union’s board plans to decide today about next moves.

Policymakers from governments to central banks are watching closely. Aside from the short-term disruption from potential shutdowns, economists are concerned about the longerterm impact of wage stagnation. If the region’s most prosperous country can’t increase pay, others may face an even greater hurdle. That would complicate the European Central Bank’s efforts to boost inflation and eventually unwind stimulus measures.

While labour leaders want a sizeable pay raise as well as more work-life balance for staff, employers worry about keeping production lines running amid an increasingly tight market for skilled workers. — Bloomberg