Volkswagen has reached an agreement with workers at its Mexican plant to avoid a strike threatened by the factory’s union.

VW is one of the largest car producers in Mexico which is a major supplier of vehicles for the US market.

The company said in a statement that it agreed to give workers a 6% wage increase.

The plant in Puebla, Mexico, has hired more than 2,500 workers since 2010 and hopes to reach a new production record this year.

Mexico’s auto industry has rebounded strongly from the 2009 recession, but near-term demand could be hurt by the uncertain economic situation in the US.