Volkswagen is beginning to feel the pinch from prolonged strikes in eastern Germany, according to Dow Jones.

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“If the strikes continue, we’ll have to look more closely at the situation,” a VW spokesman told the news agency on Monday. “But at the moment, we’re managing.”

Strikes by labour union IG Metall have entered their third week and are set to continue until Saturday, Dow Jones said, adding that the union is demanding that employers in eastern Germany reduce the working week to 35 hours from 38, in line with standards in more prosperous western Germany.

Dow Jones said steel workers won concessions from employers earlier this month and working hours in that industry will be gradually reduced in three stages to reach 35 hours in 2009.

However, manufacturing employers group Gesamtmetall is maintaining a hard line and said on Monday that a 38-hour work week is critical for the reconstruction of the former communist east Germany, the news agency said.

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Dow Jones noted that east and west Germany were reunified 13 years ago, but the east still lags behind the rest of the country economically and suffers from chronically high unemployment.

The report said that VW has suffered more than most employers in the region where it has an engine factory in Chemnitz and an assembly plant in Mosel, which makes Golf and Passat models.

The Mosel plant has a capacity of 11,000 cars a day, while the Chemnitz plant makes up to 3,400 engines a day for various VW cars. The strikes at the two plants have been going on since June 3, Dow Jones said.