Carmakers DaimlerChrysler, Porsche and Audi are bracing themselves for expensive production stoppages today when over 50,000 engineering and automotive workers are expected to go on strike.
IG Metall, one Germany's most powerful unions, called the strike in the southern state of Baden-Württemberg after the collapse of national pay talks.
Today's stoppages will affect at least 21 companies alone and could cost Germany's car industry an estimated €300 million per strike day.
"That's a good thing. The more painful a strike is, the faster we will get the employers to give in," said Mr Klaus Zwickel, head of IG Metall in a newspaper interview yesterday.
Over 90 per cent of his members voted for strike action last week after the union walked out of pay talks, calling industry's final offer of 3.3 per cent over 13 months "a provocation".
The union's final demand in talks was around 4 per cent, but yesterday Mr Zwickel said the unions has returned to its original demand of a 6.5 per cent pay rise.
Industry leaders said the union's demand "bordered on madness" and would drive up unemployment.
"If companies show solidarity with those affected by the strikes then employers will have the necessary strength to survive this fight," said Dr Michael Rogowski, president of the Federal Association of German Industry.
The union is hoping to avoid employer retaliation through lockouts by using a "flexi-strike" system of short, unexpected stoppages.
"A company that is affected will not know if it will be affected again in a few days," said Mr Zwickel.
The strikes, the first in the sector for seven years, are a blow to the Chancellor, Mr Gerhard Schröder, though he says he is confident the strikes will be shortlived.
"It is the legitimate right of workers to fight for their demands.
"However, I am hopeful that they will return quickly to the negotiating table to reach a result sensible for the whole economy," said Mr Schröder in a newspaper interview published today.
Economists have warned the strike could delay Germany's tentative economic recovery, another setback for Mr Schröder who had hoped to face voters in September with at least the first signs of economic recovery.
IG Metall has dismissed fears that its action could delay Germany's economic recovery, saying that years of restraint in pay talks had no positive economic effect and created no new jobs.
"The economic recovery will only come when people have money in their pockets again. With increased salaries, the economy will run better," said Mr Zwickel.
Mr Klaus Zimmermann, president of the German Institute for Economic Research, warned that IG Metall's pay demand could set a precedent for pay talks in other sectors.
"If IG Metall push through with more than 4 per cent, then the dam has burst," he said.
Pay talks in the construction industry are already on the verge of collapse.
Leaders of the construction union, IG Bau, will decide today whether to call in a mediator or to end talks after employers failed to agree to their 4.5 per cent pay rise demand.
