DaimlerChrysler insists on wringing out hundreds of millions of euros from labour costs as the price for committing itself to build new car models in Germany, a top labour official reportedly said on Tuesday.

“The company is demanding several hundred million euros in savings,” DaimlerChrysler works council head Erich Klemm told an IG Metall union meeting, adding the car maker had rejected as insufficient an offer by workers to save at least €180 million yearly by foregoing agreed pay increases, Reuters said.

Promising to start protests as negotiations heat up, Klemm reportedly declared that unions would fight company demands that wages at assembly operations drop by as much as €700 euros a month as a way to safeguard 10,000 German car jobs until 2012.

Cutting pay or working longer hours without compensation was out of the question, Klemm said, according to Reuters, adding: “You will hear a lot in the days ahead from a work force that knows how to defend itself.”

Reuters noted that increasing numbers of German companies are seeking labour concessions as a way to boost productivity and maintain Germany as an attractive manufacturing centre – workers at two Siemens plants have already agreed to work longer hours without extra pay, a step hailed by employers but greeted warily by unions who do not want it to be seen as setting a precedent for other employees.

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The news agency added that the only DaimlerChrysler plants that make luxury Mercedes-Benz cars and Maybach limousines in Europe are in Germany even though other car makers have diversified production to tap relatively inexpensive labour in eastern Europe.