Wage deal

The agreement was struck after three rounds of negotiations between trade unions and Volkswagen (VW) bosses. Union representatives had originally demanded a 6 percent pay increase, but agreed to 3.2 percent plus a one-time payout of at least 500 euros per person.

“VW tried to keep the underlying pay increase below 3 percent at all costs,” IG Metall’s chief negotiator Hartmut Meine said at a press conference in Hanover. “But eventually, they accepted the need to grant workers a share in VW’s good economic development.”

The deal will affect workers at VW factories in Wolfsburg, Braunschweig, Hanover, Salzgitter, Emden, and Kassel, and covers the next 16 months.

Inflation a concern for policymakers

Some policymakers have voiced concerns that the deal could become a benchmark for unions seeking wage hikes for workers in other sectors as Germany leads Europe’s economic recovery. If that were the case, the result could be above-target inflation in the eurozone.

However, experts say that Germany’s booming auto sector stands apart from other sectors, such as the chemicals industry, where growth has not been as impressive.

Volkswagen was keen to avoid strike action as it is already struggling to keep up with demand after a components shortage curtailed production in January at its main factory in Wolfsburg.

Last month, VW announced that 2010 sales rose by 13.5 percent to 7.14 million units. The company aims to increase 2011 sales by 5 percent.

Author: Deanne Corbett (Reuters, dpa)
Editor: Sam Edmonds