VW Agrees to Lift Wages for German Workers Despite Scandal Costs

VW Sets Aside $18 Billion to Pay for Diesel Scandal
  • Contract covers 120,000 workers at six German VW factories
  • Engine manipulation triggered first operating loss since 1993

Volkswagen AG agreed to raise German workers’ pay after labor leaders vowed that employees won’t foot the multi-billion-euro bill to resolve its diesel-emissions scandal.

Wages will rise 2.8 percent in September and another 2 percent in August 2017 under a new collective bargaining agreement with the IG Metall union, VW said Friday in a statement. The carmaker will make a 200-euro ($225) additional contribution to each employee’s pension.

“The agreement reached takes into consideration the interest of employees in shaping their working life in a flexible way at the same time as increasing our flexibility,” Karlheinz Blessing, Volkswagen’s head of personnel, said in the statement, This is an essential prerequisite for improving our competitiveness.”

The agreement is in line with the 5 percent raise the union was demanding at the start of pay talks. It underscores the far-reaching influence workers have at Volkswagen. Labor representatives account for half of the 20 seats on the manufacturer’s supervisory board and can block important decisions. Last week, VW granted German workers 3,950 euros in profit-sharing despite suffering an operating loss in 2015 stemming from the costs of the emissions-manipulation scandal. Profit-sharing will be calculated on a two-year basis under the new contract, Volkswagen said Friday.

The contract applies to 120,000 workers at the main VW brand’s six factories in western Germany, including the main plant in Wolfsburg. IG Metall had demanded a 5 percent pay raise when talks started.

Volkswagen has set aside 16.2 billion euros to cover the costs of fixing diesel engines in as many as 11 million cars worldwide that were rigged to cheat on official emissions tests. Efforts to repair 8.5 million cars in Europe are off to a slow start, while talks with U.S. authorities over making some 500,000 cars in America compliant or buy them back are dragging on.

The 4.07 billion-euro operating loss last year was Volkswagen’s first since 1993. Without earnings contributions from its two Chinese joint ventures, which aren’t included in the operating-profit figure, Volkswagen would have reported its biggest net loss ever.

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