German auto industry sentiment deteriorates, casting a shadow over VW's wage negotiations

An industry survey showed business confidence in Germany's auto sector further slipped into negative territory in August, setting a gloomy tone for wage talks that Volkswagen (VWAGY.US) is due to start on Wednesday over its ambitious cost-cutting plans. The Ifo Institute said Wednesday that its business confidence index for the industry fell to -24.7 in August from -18.5 in July. Ifo industry expert Anita Woelfl said "sentiment in the automotive industry is falling sharply" and noted that expectations for the next six months were notably pessimistic. Ifo's monthly survey showed the expectations index fell to -40.5 in August from -29.5 in July. "German car companies are being hit by the lack of new orders, especially from abroad," Woelfl said. "This is now also reflected in personnel planning." On Monday, Volkswagen said it would bring forward the end of a job security program in place since 1994 and prepare for the closure of its German plants. Volkswagen Group CEO Oliver Blume said in a written statement: "The European automotive industry is in a very tough and challenging situation." "The economic environment is becoming more difficult, new competitors are entering the European market. In addition, Germany as a manufacturing center is falling further behind in terms of competitiveness." The company, Europe's biggest carmaker, has long been a symbol of German industrial might. It will hold management and employee talks later on Wednesday.