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Signs of Change at Mercedes, VW

The brands Mercedes and Volkswagen are known around the world, but their fame remains in the past -- for now. The automobile companies are examples of improvements taking place in Germany's most important industry.

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Mercedes and VW are bringing movement into the auto industry

The pictures are easy to compare as new managers take the wheel at Volkswagen and Mercedes. Mercedes' Dieter Zetsche and Volkswagen's Wolfgang Bernhard both presented their new models with smiling faces at this month's Frankfurt International Motor Show, but soon after both men dropped the happy faces they showed the press.

As Mercedes this week announced it would cut 8,500 jobs in Germany, and Volkswagen employees in a German plant agreed to work for less to keep production of a new sport utility vehicle from moving to Portugal, both managers claimed they were just getting started with their work of putting their companies back in order.

Transforming Germany 's car industry

Bildgalerie IAA 2005 Mercedes Bluetec Hybrid

Job cuts followed the auto show shine at Mercedes

The two car manufacturers even discussed investing in each other as a protection against hostile takeovers. Though talks on the topic have been put off until next year, Mercedes and VW don't expect antitrust difficulties as the investments would stay below 20 percent and the companies would not exchange board members, according to a report in Der Spiegel newsmagazine.

Germany's automobile industry is at the beginning of a radical change. Some studies already show that mass manufacturing of automobiles in Germany could be completely phased out in as little as 15 years time with factories continuing their migration to China, and India as well as Japan and Korea to avoid the Western Europe's relatively high production costs.

The threat of moving to less expensive countries as a way of pressuring employees to work longer for less or watch their jobs disappear seems to be the only answer coming from the auto industry brass. At the same time managers' billion-dollar bad decisions go unpunished, giving the workforces a first-hand lesson in globalization.

Staff celebrates job cuts

There's more that connects Dieter Zetsche and Wolfgang Bernhard than they way they've started their work in Germany. The pair was also responsible for reorganizing DaimlerChrysler's US subsidiary, Chrysler, where they cut 26,000 jobs and closed several factories.

The workforce in Detroit celebrated Zetsche's return to Germany -- not because they wanted to get rid of him, but because they realized the cuts were the only way to keep the company running at all.

Mercedes SLK Produktion in Bremen

Chrysler's staff agreed cuts needed to be made

Now, back home in Germany, the men are left to iron out the problems caused by their all-too visionary predecessors, and there are hard times ahead for Germany's production line workers.

The stock market has already rewarded Zetsche and Bernhard for doing their unenviable task, pushing share prices up to heights they haven't seen in a long time. How long it lasts is an open question, but the markets always bet on the future and one thing is for sure: Production in Germany is moving forward.

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