Volkswagen Agrees on 5.7% Pay Increase for German Workers

Volkswagen AG (VOW), Europe’s largest carmaker, agreed to raise wages for German workers by 5.7 percent over 20 months as the country’s biggest manufacturing union helped employees tap into the company’s growing profit.

VW will increase base pay by 3.4 percent as of Sept. 1 and another 2.2 percent as of July 1, 2014, the Wolfsburg, Germany-based company said in a statement today.

Contract terms are in line with an industrywide pay increase that the IG Metall union won in mid-May for about 770,000 manufacturing workers in the state of Bavaria. That accord is being used as a model for labor agreements elsewhere in the country. The VW pact, negotiated separately from IG Metall’s regional accords, covers 102,000 employees at six plants in western Germany and the financial services unit.

Germany’s economy grew just 0.1 percent in the first quarter, according to the Federal Statistics Office. The economy of the euro area, Germany’s biggest export destination, is slated to shrink a second consecutive year in 2013. IG Metall and employers have been taking regional industry strengths and weaknesses into account in weighing a national pay accord. Inflation will amount to less than 2 percent in 2013 and 2014, according to estimates compiled by Bloomberg.

VW rose as much as 0.9 percent to 169.05 euros and was trading up 0.7 percent at 11:08 a.m. in Frankfurt. That pared the stock’s decline this year to 2.1 percent.

The company’s presence in China and profit from its Porsche, Audi and Bentley luxury brands have helped VW avoid the full effects of slumping demand for mass-market cars in Europe, where industrywide sales are falling a sixth consecutive year.

Delivery Gains

The company delivered more than 3 million cars, vans and trucks worldwide in the first four months of this year, the first time its sales have exceeded that figure in the period.

The carmaker’s earnings before interest and taxes rose 2.1 percent last year to 11.5 billion euros ($14.9 billion). Volkswagen is forecasting an increase in revenue in 2013, driven by higher vehicle sales, while operating profit is predicted to match last year’s figure because of the European car-market decline and an increase in spending on new models and factories.

Volkswagen’s workforce in Germany totals 249,000 people. It employs just fewer than 550,000 workers worldwide.

To contact the reporter on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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