After wage negotiations between Volkswagen AG and the union of its Puebla, Mexico plant broke down, workers went on strike on Tuesday. Red and black strike banners were hung at the entrances to the factory while workers stood their ground, shouting slogans. Workers are asking for a 3% wage increase, according to union leader Victor Cervantes.
On the other hand, Volkswagen offered a 1% increase in wages beginning February 2010 and a 5,500-peso ($425) cash bonus. Stoppage of the plant's operations, which make Jettas and New Beetles for the US market, is believed not to have an immediate impact.
As of August 1, the VW brand recorded a 108-day supply of cars, more than double the US industry average. Sales of VW-badged vehicles fell just 13.5% this year through July in a market that has fallen 32.1%. Like the rest of Mexico's auto industry, VW's Mexican plant has been hit hard by the U.S. recession.
Mexico's auto output fell 25% in July compared to the previous year. Mexico's plummeting auto exports have been a leading factor in the country's recession, with the economy this year expected to contract more than any time since 1932.
Volkswagen builds 1,500 cars a day at the plant for both the Mexican market and for export. A VW spokesman in Germany said the company did not expect a significant impact from the strike as contract negotiations were scheduled to resume Thursday.