Volkswagen's German workers win 4.3 percent pay rise

Volkswagen (>> Volkswagen AG) will grant workers at its German factories a 4.3 percent pay increase despite difficulties in core western European markets amid the euro zone debt crisis.

Volkswagen (>> Volkswagen AG) will grant workers at its German factories a 4.3 percent pay increase despite difficulties in core western European markets amid the euro zone debt crisis.

The 97,000 workers at VW's six western German plants and 5,000 employees at the financial services division will receive the additional pay over 13 months, starting June 1, Europe's largest carmaker said on Thursday. Under the new contract, as many as 3,000 temporary workers will be hired permanently.

"This is a very good and acceptable compromise," Hartmut Meine, chief negotiator for the IG Metall union, said at a press conference in Hanover, Germany. "We got a bit more than the overall industry."

Earlier this month Germany's largest labor union agreed with employers to increase wages across the country's metal and engineering industry by 4.3 percent. The increase will benefit 3.6 million workers at companies including Daimler (>> Daimler AG) and BMW (>> Bayerische Motoren Werke AG).

The pay deal is equivalent to slightly less than 4 percent when VW's terms of duration are applied.

"The VW accord seems reasonable," Alexander Schumann, chief economist of the Berlin-based DIHK industry and trade chambers, told Reuters.

VW, which posted a 10.2 percent increase in first-quarter operating profit to 3.2 billion euros ($3.97 billion), is battling with declining sales in core western European markets. The group's four-month deliveries in the region, excluding the sturdy German home market, fell 5.9 percent to 661,400 vehicles.

"Workers will earn a decent pay increase," said Martin Rosik, VW's chief negotiator.

Rosik added that the new pay agreement will not improve VW's fight against growing competition from low-cost Asian markets, where Hyundai Motor (>> Hyundai Motor Co) and Kia Motors (>> Kia Motors Corporation) are based, though he would not specify the total cost burden of the new pay agreement.

Alexander Schumann, chief economist of the Association of the German Chambers of Industry and Commerce, told Reuters: "The wage agreement looks reasonable but labor costs are becoming a growing concern to engineering companies. Companies must decide for themselves what level of costs they can bear."

Meine, who also sits on VW's supervisory board, said that the prolonged European debt crisis may lead to shorter wage agreements, hailing the VW deal's 12-month maturity. "No one can realistically say what the economic and financial situation in the euro zone will look like in a year from today," the union official said.

IG Metall said that VW agreed to provide 10 percent more apprenticeships and will pay apprentices a 200-euro annual bonus from this year. Temporary staff may be hired after 36 months, though this period can be shortened to 18 months.

VW's previous in-house pay deal, in February 2011, increased wages for German workers by 3.2 percent. The agreement, covering 16 months, also granted workers a one-off payment worth 1 percent of their base salary.

(Reporting by Andreas Cremer; Editing by David Goodman)

By Andreas Cremer

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