Lufthansa cabin crew to strike in Frankfurt, Berlin

A flight schedule board shows cancelled flights of German air carrier Lufthansa at the Fraport airport in Frankfurt August 31, 2012.

Credit: Reuters/Kai Pfaffenbach

FRANKFURT | Tue Sep 4, 2012 3:34am IST

FRANKFURT (Reuters) - Lufthansa (LHAG.DE) passengers face further disruption after cabin crew representatives said late on Monday they would go on strike on Tuesday for 8 hours in Frankfurt and Berlin in a row over pay and conditions.

The German cabin crew union UFO said it was calling on its members working at Lufthansa to go on strike in Frankfurt from 0400-1200 GMT and in Berlin's Tegel airport from 0300-1100 GMT on Tuesday.

An eight-hour strike at Frankfurt on Friday forced the cancellation of almost 200 Lufthansa flights, leaving 26,000 passengers stranded and costing Germany's biggest airline millions.

The airport, Germany's busiest, was also closed to inbound flights from Europe for several hours due to congestion.

The UFO union, which is calling for a 5 percent pay increase and guarantees against outsourcing and the use of temporary workers, had threatened to widen the strike action if Lufthansa did not make any concessions.

Lufthansa is in the midst of a 1.5 billion euro cost-cutting programme to combat rising fuel costs and competition from low-cost and Gulf carriers. The airline has said it will not improve its offer - 3.5 percent more pay, but longer hours.

(Reporting by Victoria Bryan, Peter Maushagen and Christiaan Hetzner; Editing by Leslie Gevirtz)

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Volkswagen hopes revamped Golf will help it catch Toyota

A visitor sitting in a Volkswagen Golf Cabriolet speaks to a staff member at Auto China 2012 in Beijing April 23, 2012.

Credit: Reuters/Jason Lee/Files

By Andreas Cremer

BERLIN | Mon Sep 3, 2012 7:57pm IST

BERLIN (Reuters) - Volkswagen is hoping a sleek makeover will keep its Golf in the best-selling compact car spot, helping the German automaker overtake Toyota and GM as the world leaders.

But the mid-range vehicle faces an onslaught of competition from cheaper and premium models, just as car makers grapple with an economic slump in Europe and slowing growth in China.

VW has reported record deliveries and higher profits while rivals have struggled. However the seventh-generation Golf, to be unveiled in Berlin on Tuesday, may not be enough to keep Europe's biggest automaker on its winning streak, analysts say.

"Success of the new Golf is absolutely critical to VW's expansion targets but the new version will be battling in a tough environment," said Stefan Bratzel, head of the Center of Automotive Management think-tank near Cologne, Germany.

Volkswagen is on course to bump General Motors (GM.N) into the world no.3 ranking this year. It aims to sell a world-leading 10 million vehicles by 2018, up from the 8.36 million recorded last year, and push past Toyota (7201.T).

The new hatchback will boast a range of features aimed at luring buyers away from cheaper rivals made by Hyundai, Skoda and Seat, volume makers including Peugeot Citroen (PEUP.PA) and GM's Opel division, as well as from Audi and BMW (BMWG.DE) at the top end.

Pricing has not yet been announced for the new Golf, which will be sleeker and more than 100 kilograms lighter than its predecessor, thanks to increased use of ultra-strong steel, making it cheaper to run and cutting emissions.

The 140-horsepower petrol version will produce an average 112 grams of CO2 per kilometer, complying with European Union targets. It will also be 2.24 inches longer and 0.52 inches wider than its predecessor, enlarging the interior to compete more effectively with SUVs and minivans.

To attract luxury buyers, VW is touting a higher quality cockpit finish with more screens and driving assistance gadgets aimed at fending off a sporty replacement of Daimler's (DAIGn.DE) Mercedes-Benz A-Class and the new BMW 1-Series introduced last year.

This may still not be enough to keep the competition at bay.

"The European (compact) market is fully saturated and the Golf keeps attracting competition, even from within the VW group," said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, citing the Audi, Skoda and Seat brands.

"It's no synonym for future growth."

RATTLED

Research firm IHS Automotive is confident the Golf, with over 29 million global sales since its 1974 launch as the iconic Beetle's successor, will keep the top spot.

Sales will rise 17.3 percent to 630,000 units by 2017, it predicts, followed by Toyota's Prius with an 18.7 percent gain to 488,000 and Ford's Focus with a 2.4 percent decline to 443,000.

But there are signs the company is worried.

With its affiliate Kia Motors (000270.KS), Hyundai (005380.KS) is the envy of global rivals such as VW, outgrowing the market during a severe downturn by offering stylish models at affordable prices backed by savvy - if sometimes risky - promotions and helped by a cheaper currency.

VW views Hyundai as a serious contender. Checking out a Hyundai model at the 2011 Frankfurt Motor Show, chief executive Martin Winterkorn was caught on camera examining the steering wheel adjustment, and saying: "Nothing rattles ... Why can they do it? BMW can't. We can't."

The YouTube video has had almost 1.8 million hits.

UNTESTED

A risk for VW is that it is building its updated bread-and-butter car on a new modular platform, that will allow it to enhance parts-sharing among its car brands.

While the new technology aims to make production of 3.5 million small- and mid-sized cars 20 percent cheaper, and shorten assembly by 30 percent, the scaling up means any defects could expose VW to the kind of mass recalls that blighted Toyota Motor Corp (7203.T) in 2009-2010.

The updated Audi A3 compact, a competitor from within the VW family stable, will be built using the same cost-saving architecture.

The Golf is so crucial to VW's success that it is the only model the company builds on four continents.

VW expanded production of the Golf to a new plant in Osnabrueck, Germany last year, even as the financial crisis exposed chronic overcapacity elsewhere in Europe, forcing rivals Fiat (FIA.MI) and Opel to close factories in Sicily and Belgium.

"The Golf has a preeminent role at VW because of its high production volumes," VW brand development chief Ulrich Hackenberg said recently. "It's the face of VW."

(Editing by Anna Willard)

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ECB bond-buying would not breach rules: Draghi

European Central Bank (ECB) President Mario Draghi (C) arrives at the European Parliament's Economic and Monetary Affairs Committee in Brussels September 3, 2012.

Credit: Reuters/Francois Lenoir

By Francesco Guarascio

BRUSSELS | Tue Sep 4, 2012 12:43am IST

BRUSSELS (Reuters) - Purchases of short term sovereign bonds by the European Central bank would not breach European Union rules, the ECB's President Mario Draghi told European lawmakers on Monday, according to a recording obtained by Reuters.

Draghi, who is expected on Thursday to give some details of a new debt-buying scheme to help deeply indebted euro zone states, said he was not at risk of breaching the EU's taboo of directly financing euro zone economies.

"If we are in the short term part of the market where bonds have a length of time maturity of up to one year, two years, or even three years, these bonds will easily expire," Draghi told the Economic and Monetary Affairs Committee of the European Parliament.

"So there is very little monetary financing effect at all in what we are doing," he said in the session behind closed doors.

Aimed at easing borrowing costs for vulnerable, indebted countries that ask for help, the bond-buying scheme has divided ECB policymakers.

But Draghi said the plan would support the bank's central role of keeping prices stable in the 17-nation euro zone, as well as safeguarding the future of the euro.

"We cannot pursue price stability now when we have a fragmented euro zone," Draghi said. "All these developments are a way to comply with our very mandate which is maintaining price stability.

"And all this has to do very much with the continuing existence of the euro in a moment when the rest of the world has now started to question the existence of the euro," he said.

Under the plan, the ECB would buy bonds in combination with the European rescue funds to alleviate pressure on Italian and Spanish borrowing costs if the countries agreed to strict reform programmes beforehand.

Earlier on Monday, Italy's two-year bond yield fell below 2.7 percent for the first time since April on the back of Draghi's comments.

Draghi appeared to suggest Rome and Madrid needed help to maintain painful policies to cut their debt and deficits in the face of angry citizens who have seen their pensions reduced or have been laid off at a time of economic recession.

"Many of these countries have undertaken substantial progress in recent times, but we cannot exclude that at a certain time this policy will stop because of adjustment fatigue," Draghi said.

"So that's why we are asking for conditionality combined with this intervention of the ECB," he told lawmakers. (Reporting by Francesco Guarascio; editing by Ron Askew)

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