Volkswagen AG’s plant in Mexico, the only one in the world producing the popular New Beetle, reportedly was shut down by striking workers on Wednesday in a pay dispute.

Reuters said thousands of union workers walked out on Wednesday morning after earlier rejecting a 4.45% salary increase offered by the company.

Nearly 10,000 unionised employees work at the plant in Mexico’s central city of Puebla, and it produces several models, including the New Beetle that is sold in around 80 countries.

The plant was also the last manufacturing site of the classic “Love Bug” Beetle before Volkswagen stopped building the legendary vehicle last year, the report noted.

As the strike began, chanting workers unfurled a huge red, white and black union banner and hung it on the gate at the main entrance to the factory. Four women dressed in red and black set up a picket line to prevent people from entering.

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“What they are giving us is not fair,” Juan Castro, a 45-year-old mechanic who has worked there for 23 years and said he earns 220 pesos (about $US20) a day, told Reuters.

The last strike at the plant was in 2001 and lasted for 18 days before the two sides finally reached an agreement, the news agency noted.

Union leader Jose Luis Rodriguez reportedly said negotiations on the latest pay deal would resume later. He said the union’s demand of an 8.5% wage increase was “still negotiable” and he hoped for a quick resolution.

“This is not a strike that suits either side,” he told Reuters. “We intend to resolve this as soon as possible.”

The report said Volkswagen offered a 4.45% wage rise and other benefits that would improve workers’ overall package by 5.4%. It was rejected by about 60% of union members at an early morning meeting.

Reuters said the plant plans to produce about 235,000 vehicles this year though its output has slipped in recent years because of a decline in export demand, especially from the United States, and it now produces vehicles just four days a week.

Company spokesman Thomas Karig told Reuters Puebla currently produces about 1,300 vehicles per working day, although he declined to estimate the financial impact of the strike.

In the first half of the year, Volkswagen exported about 85,000 vehicles from its Mexican plant, making it the third biggest auto exporter in the country after General Motors and DaimlerChrysler, the report added.