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February 8, 2011

COMMENT: German unions to eye VW settlement with interest

Is Volkswagen's settlement with its workforce that will see its 100,000 or so employees receive a 3.2% pay rise, a precursor to a round of inflation-beating wage increases?

Is Volkswagen’s settlement with its workforce that will see its 100,000 or so employees receive a 3.2% pay rise, a precursor to a round of inflation-beating wage increases?

Germany has turned in some sparkling growth figures lately, driven largely as a result of an export boom and its workforce wants to share some of the rewards.

But with German inflation hovering between 1.2% and 2%, the 3.2% pay rise at VW might cause some eyebrows to raise, although it is certainly not excessive.

Nonetheless, the IG Metall union at VW had asked for considerably more – an eye-watering 6% in fact but the automaker settled on the 3.2% – as well as a one-time payment corresponding to 1% of salary and no less than EUR500 (US$683).

The UK is holding its breath that the Bank of England could raise interest rates in a bid to contain inflation, which is soaring as a result of extremely high fuel costs among a raft of challenging cost of living increases.

Germany seems to be pulling off the trick of maintaining relatively low inflation, coupled with robust growth, but could VW’s settlement be copied by other manufactures and would the European Central Bank start to examine its own interest rate policy?

Speaking to just-auto from Hanover, following the conclusion of extremely lengthy negotiations – the last tranche took 13 hours before finishing today – an IG Metall spokesman noted other automakers had secured deals that were worth 2.7%.

It’s a certainty those unions in Germany’s powerful auto industry will be looking at VW’s settlement with great interest.

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