Take No Loafers; New Deal: Siemens told workers to accept pay cuts or see their jobs go to Hungary. As Siemens goes, so goes Germany.

Byline: With Stefan Theil in Berlin

German CEO's don't dole out threats lightly. Tough labor laws and some of the world's strongest unions have made it too dangerous. But that came to an end last summer, when Siemens AG gave 4,000 workers at two mobile-phone factories an ultimatum--work longer, with no extra pay, or we'll move your jobs to Hungary. The workers gave in, and so began a new era in German labor relations.

Already the Siemens negotiation has sparked similar deals at hundreds of major companies, including DaimlerChrysler and, most recently, Volkswagen. Analysts say that Siemens itself is looking at more labor cost-cutting, which could affect an additional 35,000 German workers. A new CEO known for his Anglo-American style, Klaus Kleinfeld will take over the company at the end of January, and he may launch further changes. Siemens, which was on the forefront of German industrialization in the late 19th century, has become a bellwether for the 21st century. "Where Siemens goes, so goes Germany," says Dresdner Kleinwort Wasserstein analyst James Stettler.

Siemens has always been known for its ...