VW’s workers in Germany to get a pay raise image

Despite the dieselgate, Volkswagen and a powerful German labour union have agreed on a pay increase for around 120,000 workers.

Volkswagen has been put under a lot of pressure from investors to reduce its costs, including cutting on jobs and wages, since it admitted it rigged on emissions tests, a trick that triggered a record 4.1-billion-euro (4.6-billion-dollar) operating loss for 2015. As an example, activist investor TCI recently urged VW to lower labour expenses and to accordingly adjust management’s compensation as well. However, dealing with powerful labour unions is another matter and there is nothing like the pressure they may exercise upon a company. Europe’s biggest automaker has been negotiating for a long time with Germany’s biggest union, IG Metall, and it had to finally agree on a pay raise for around 120,000 workers at the carmaker’s western German plants.

Therefore, the base payment of employees covered by the agreement is to be increased in two stages. On September 1, 2016, it will first rise by 2.8 percent, for a further increase of 2.0 percent to be applied on August 1, 2017. Furthermore, each employee will receive a pension building block of 200 euros (224 dollars). “The pay agreement reached is based on the economic performance capabilities of the automotive industry and also offers employees a competitive improvement in income,” the chief negotiator for Volkswagen, Martin Rosik, said. The new wage deal is valid until January 31, 2018 and it applies for the employees at the Wolfsburg, Brunswick, Hanover, Salzgitter, Emden and Kassel plants, as well as Volkswagen Financial Services unit.