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 Business News | August 2006 
Volkswagen, Mexico Workers Reach Deal to End Strike
 Chad Thomas & Adriana Arai - Bloomberg
| | Volkswagen plant workers pack up outside of the plant in the Mexican state of Puebla August 23, 2006. Volkswagen and union leaders at its Mexico plant, which makes the popular New Beetle cars, agreed to a new pay deal on Wednesday, ending a strike that began last week. (Reuters/Imelda Medina) |
Volkswagen AG, Europe's largest carmaker, and its Mexican union reached an agreement to raise pay and benefits by 5.5 percent, ending a strike that began Aug. 18.
The 9,600 workers will receive a 4 percent pay increase and an additional food allowance of 150 pesos ($13.50) a month, Consuelo Minutti, a spokeswoman for the plant in Puebla, Mexico, said in a telephone interview today. Production at the factory resumed at 4 p.m. New York time, a company spokesman said.
The plant produced about 300,000 vehicles last year, mostly Jettas and New Beetles. The factory is important to Wolfsburg, Germany-based Volkswagen's operations in the U.S., where the carmaker has been increasing sales this year after they fell 37 percent between 2002 and 2005.
"Common sense has prevailed," said Stephen Pope, head of equity research at Cantor Fitzgerald in London, who today reaffirmed his "buy" rating on Volkswagen shares and retained his price target of 73 euros. "VW has production back on stream and the employees have a deal and have made a point."
Shares of Volkswagen fell 27 cents, or 0.4 percent, to 62.10 euros. The stock has gained 39 percent this year, the third-best performance on Germany's benchmark DAX Index in 2006, valuing the company at 22.2 billion euros ($28.4 billion).
The deal meets workers' demands for a 5.5 percent increase, including the food coupon. The union initially wanted an 8.5 percent pay and benefits hike, while Volkswagen was offering 4.5 percent.
'Very Important Achievement'
"This is a very important achievement for the union," Luis Rodriguez Salazar, the union president, said today at a Puebla news conference broadcast by Mexico City-based Radio Formula. He said Volkswagen agreed to pay workers 50 percent of their salaries from the strike days.
Chief Executive Officer Bernd Pischetsrieder is trying to cut labor costs and slim Volkswagen's global workforce, embarking on an effort to eliminate as many as 20,000 German jobs. The cutbacks are part of a plan to more than triple pretax profit to 5.1 billion euros in 2008 from 1.1 billion euros in 2004.
Volkswagen threatened Aug. 21 to shut its biggest Brazilian plant, located in the Sao Paulo metropolitan area, if workers don't accept firings and a plan to cut payroll costs by Aug. 25. The carmaker is seeking to fire 3,600 of the plant's 12,000 workers and cut labor costs 25 percent.
Foundry in Hanover
Pischetsrieder has also said the carmaker must consider selling or closing parts of German component factories. Volkswagen announced today it's in talks to sell a foundry in Hanover, Germany.
"We are currently holding discussions on a sale," Hartwig von Sass, a spokesman, said in a telephone interview. "There is no decision yet."
A sale is one option that Volkswagen is considering for the foundry, which employs 1,250 people, von Sass said. He declined to comment on a Manager Magazin report today that Volkswagen is talking to two companies, one of which is Ripplewood Holdings LLC's Honsel unit in Germany.
"We cannot comment on the details of this article," Heinz Pfannschmidt, Honsel's chief executive, said in a telephone interview today, citing confidentiality concerns.
To contact the reporters on this story: Chad Thomas in Berlin at cthomas16@bloomberg.net ; Adriana Arai in Mexico City at Aarai1@bloomberg.net |
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