Changing its tune

6 October 2004 By Marianne Brun-Rovet

It isn t clear which story is true. But sending mixed signals certainly won t foster confidence in Karstadt s restructuring. One day the German retailer says it will go bust if unions don t back a restructuring plan. The next day it says insolvency isn’t imminent.

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KarstadtQuelle does not face insolvency, the German retailer's chief executive Christoph Achenbach said on Tuesday just two days after warning unions that the group would lose the support of its banks if workers did not accept drastic job cuts.

Achenbach's comments came as Karstadt and its workers reached a deadlock over the retailer's restructuring plan. Karstadt has rejected a union offer to sacrifice staff bonus payments instead of jobs.

Karstadt warned over the weekend that it faced insolvency if unions did not support its restructuring plan, designed to reduce debt and return its department stores to profitability. Services union Verdi opposed the proposed job cuts and longer working hours, suggesting staff take bonus cuts instead. But the company on Tuesday said relinquishing bonuses was not an alternative to the turnaround plan.

Karstadt, which runs departments stores and a mail order business, plans to sell 77 smaller stores, close its specialty shops, spin off its real estate portfolio, sell its fitness centres and exit its joint venture with coffee chain Starbucks. The turnaround would affect 9,800 staff.

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