UPDATE 2-Spain's Seat agrees to reduce layoffs by half


(Adds union call for La Caixa investment)

MADRID, Dec 16 (Reuters) - Volkswagen AG's Spanish carmaker Seat said on Friday it had agreed to reduce proposed layoffs by more than half, after months of talks with unions, as it seeks to cut costs to counter weak European sales.

Seat agreed 660 layoffs with unions, down from an originally planned 1,346, after all-night talks.

"The agreement that we have reached will allow us to considerably reduce forced layoffs," Chairman Andreas Schleef said in a statement.

The deal comes after a series of strikes in protest at the job cut proposals which initially amounted to about 9 percent of the workforce.

Union UGT said it was satisfied with the deal, but called for powerful Barcelona-based savings bank La Caixa to buy a stake in Volkswagen to bring greater clout and stability to Spain's auto industry, agency Europa Press reported.

While a spokeswoman at La Caixa -- which has a huge share portfolio and considerable political power -- declined to comment, local media quoted a senior regional politician as saying the idea was not be ruled out.

"We don't rule out this formula," said Miquel Iceta, spokesman of the Catalan Socialist Party, which rules Catalonia in coalition.

Spanish savings banks are closely linked to Spain's regional governments, but are not controlled by them.


Talks aimed at averting the job cuts broke down earlier this month. Under Spanish law it fell to the Catalonian regional government to try and help resolve the dispute.

The local government gave both sides an ultimatum on Monday to reach a deal within three days.

Seat has around 16,000 employees in Spain, mostly at its main plant at Martorell in Barcelona which produces models like the Altea, Leon and Toledo.

Most of the major carmakers have plants in Spain, attracted by its closeness to big European markets like France and Germany and by labour costs that a decade ago were competitive.

But Spain's labour costs have risen and its markets are facing stiff competition from cheaper eastern European workers in the newly-expanded European Unions. The 686 workers involved will be offered alternatives such as early retirement and voluntary extended leave of up to five years, El Pais newspaper said.

Around 300 workers had already expressed interest in these options, the paper said.

No-one at Seat was immediately available to comment.

Seat says it needs to cut jobs because car sales in Europe have dropped this year.

Spanish plants produced 4 percent fewer cars in November than in the same month last year, data from national manufacturers' association ANFAC showed earlier this month.

Seat's production is expected to drop to about 390,000 vehicles this year from 416,318 in 2004 due to lower demand and the company's decision to focus on lower-volume, more up-market models.



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