(Recasts with warning that strike could spread, call for talks)
By Emma Thomasson
BERLIN, June 23 (Reuters) - German engineering union IG Metall threatened on Monday to spread strike action in eastern Germany to the west of the country if talks set to resume from Thursday fail to bring a deal by the weekend.
The strike, aimed at reducing weekly working hours for engineering workers in eastern Germany from 38 hours to the western norm of 35 hours, has been going on for three weeks in the east and has started to hurt production in the west.
IG Metall vice-chairman Juergen Peters, designated to become the union's chairman later this year, said IG Metall wanted to resume talks from Thursday at the latest.
"If we don't manage to make progress by the weekend we will think about taking suitable measures in the west," Peters said. He did not say what those measures might be, but said IG Metall had a variety of options at its disposal.
He sounded a downbeat notes on the outlook for talks, saying: "I don't see anymore where we could reach compromises."
The engineering union said more than 9,000 workers had downed tools at 10 factories in the eastern states of Berlin, Brandenburg and Saxony on Monday. A shortage of parts from affected eastern factories has started hurting western output.
Carmaker BMW said the strike had stopped production on Monday at its Munich factory, where it builds 800 of its 3-Series cars per day and at Regensburg, where it makes 850 of the mid-sized cars. About 10,000 workers were affected. Volkswagen said it would have to halt production of its Golf and Lupo models at its Wolfsburg plant on Friday.
Peters told German radio earlier that the union was ready to consider cutting the working week in stages and at varying speeds depending on the economic position of individual plants.
Engineering workers in the east currently work three hours longer a week than their counterparts in the west, a difference employers say is justified because of lower productivity.
THREAT TO EASTERN COMPETITIVENESS
Germany's VDA auto industry association said the daily production loss due to strikes was 1,370 vehicles in eastern Germany and 1,800 vehicles in the west. VDA President Bernd Gottshalk said the strike and the demand for shorter hours risked undermining eastern Germany's competitive advantages.
"The strike is hitting the eastern German car industry in the midst of a time of revival and integration," he told a news conference. "The investment process will grind to a halt."
Chancellor Gerhard Schroeder has urged unions and employers to end the strikes as soon as possible so as not to further damage growth in the already depressed former Communist east.
Wolfgang Wiegard, chairman of the "five wise men" panel of independent economic advisers to the German government, told ZDF television on Monday the strike would probably not hurt the national economy much but was "fatal" for the east.
"The standing of eastern Germany as a place to do business will suffer and is already suffering," he said.
Unemployment in the former Communist east is about 20 percent. BMW has said the strike might make it reconsider the scale of an investment in the eastern city Leipzig, where it is building a new factory which was due to create 5,500 jobs.
The German car industry accounts for 10 percent of total industrial output and hundreds of thousands of jobs. (With additional reporting by Madeline Chambers in Frankfurt)