Shares in Volkswagen fell more than 2 percent on Monday ahead of a vote by German metalworkers union IG Metall on whether to reopen its contract with Europe's biggest carmaker.
IG Metall's top wage commission is due to announce later on Monday whether it had approved a proposal from its Lower Saxony regional branch to reopen the contract.
If labor gives the green light, the world's fourth-largest carmaker would come significantly closer to extending the work week at its VW brand in Germany to 35 hours from the current 28.8 without compensation.
The potential talks may even put to end to the brand's expensive in-house wage agreement, which is partly responsible for hundreds of millions of euros in losses last year at its six western German plants, which employ around 100,000 workers.
Management's plan would entail changing the current wage agreement that expires at the end of January, and it therefore requires union approval.
VW hopes the talks will lead to labor cost cuts of 1 billion euros ($1.3 billion) by 2008, which it desperately needs to help hit its mid-term financial targets, but analysts fear its leveraging power is limited since IG Metall already succeeded in guaranteeing VW jobs in Germany through 2011.
VW shares were down 1.75 percent at 61.06 euros at 0942 GMT, after earlier reaching as low as 60.66 euros. The DJ Stoxx European car sector index was down 0.76 percent.
Union negotiations are likely to last longer and achieve less than investors (or management) hope for, in our view, Credit Suisse told clients on Monday.
As the UAW is demonstrating with DaimlerChrysler (DCXGn.DE) in the U.S., why should unions concede without a GM-like crisis, it added, saying VW was a trading sell.
Volkswagen, the only company in Germany that holds its own collective bargaining with IG Metall, pays about 11 percent more than domestic competitors that already offer above-average compensation compared with the rest of the German engineering industry.
On Friday it presented labor a package of concrete steps including a proposal to allocate another mass-volume car model to its ailing Wolfsburg plant and give workers a greater share in VW profits.
Hartmut Meine, the union's chief negotiator for Volkswagen and its regional head in the carmaker's home state of Lower Saxony, then agreed to ask its top wage commission to reopen Volkswagen's collective wage agreement.
Both sides hope the talks can wrap up by November in time for board approval of its rolling investment plan. Negotiations are expected to resume on September 18.