Strike action by almost 50,000 German workers yesterday shut Mercedes-Benz and Porsche plants in the Stuttgart region while a planned series of one-day strikes could hit hundreds of other companies in the next few weeks.

It was the first industry-wide strike in Germany for seven years and is estimated to have cost the two car companies about 2,100 vehicles.

IG Metall, the powerful union representing 2.7 million factory workers, is demanding wage increases of 6.5 percent a year and said that it would not settle for anything less than 4 percent.

Manufacturing industry executives have rejected the demand and do not plan any further discussions until at least next week.

Observers say such hard line positions are considerably different from the past when unions and tried to avoid confrontation. In 30 years there have been only four industry-wide stoppages.

Key to the confrontation - and this could be a warning to the powerful US and Canadian car workers' unions negotiating new agreements this year and next - are the industry-wide wage deals which the companies say are too inflexible.

About half the companies in eastern Germany have dropped out of collective bargaining agreements and now some in the west are following suit.

German employees have seen no real increase in wages for several years while employers - facing stiff competition from factories in other countries employing cheaper workers - want no further increase in labour costs.

"It is ridiculous to talk about a 6.5% increase at a time like this," Ulrich Ruetz, chief executive of Beru, a midsize company outside Stuttgart that produces glow-plugs for diesel engines, told the New York Times yesterday.

"We can shift our work to our plants in Hungary, Ireland or even South Korea. We cannot do it in the short term, but we can do it."

Employers worry that a generous settlement to the current dispute with the powerful IG Metall union, whose members work in the car and component industries, will lead other workers to demand similar hefty increases as their negotiations begin this week.

One parts company chief executive, who refused to be identified, told the New York Times that his company might drop out of the employers' bargaining group, Gesamtmetall, if it settles for raises of even 4%.

He said that car companies wanted the group to agree to the union demand of 6.5% but would not let suppliers like him pass on the increased costs resulting from such a deal. His company had already been forced to cut car prices by the car companies it supplied, the executive added.

The New York Times said it was likely workers would end up with raises of around 4% but the paper cited industry executives as saying that the flow of jobs overseas would increase as a result.