Volkswagen Workers Strike in Slovakia as Economic Model Buckles

  • Company calls Slovak union’s salary demands ‘irresponsible’
  • Strike seen reducing GDP growth by 0.1ppt every 12 days

An employee carries the radiator grille of a VW Touareg sport-utility vehicle at the Volkswagen AG (VW) factory in Slovakia.

Photographer: Jochen Eckel/Bloomberg

Workers at Volkswagen AG’s Slovak unit began an indefinite strike over wages, underscoring the risk of a skilled-labor shortage materializing in a key European Union manufacturing hub as unemployment plumbs record lows.

The walkout began at 6 a.m. on Tuesday after talks failed to reach a last-ditch compromise on Monday. Workers are asking for a 16 percent rise in wages by next year, almost double the company’s last offer for an 8.9 percent increase, a one-time payment of 350 euros and other benefits. The union’s demands are “irresponsible and put the future of the company and jobs at jeopardy,” the unit’s spokeswoman, Lucia Kovarovic Makayova, said by email.

Slovakia, the world’s largest car producer per capita, is at the center of a transformation across the EU’s manufacturing-heavy east as plunging unemployment fuels wage demands and puts the region’s cheap-labor economic model at risk. While companies are trying to control wage costs, workers and some policy makers have pushed for bigger paychecks, arguing that they’re needed to raise living standards that have languished well below those of richer EU states in the quarter century since the fall of Communism.

Maximum, Minimum

The average wage in Volkswagen’s Slovak unit is about 1,800 euros ($2,010) a month. That’s the highest among the country’s three foreign carmakers, which also include Kia Motors Corp. and PSA Group. While the German carmaker’s assembly-line workers earn almost double the Slovak average of 912 euros a month, they argue their pay doesn’t correspond with productivity. It compares with an average 4,200 euros earned by workers at Volkswagen’s German factories.

Hundreds of workers gathered in front of the Bratislava factory instead of starting their morning shift and waved placards saying “Don’t Humiliate Us” and “We Do the Maximum, You Do the Minimum.”

The strike halted the production of sport-utility vehicles, while the assembly of so-called New Small Family cars continued, the company said. Production wasn’t affected in Volkswagen’s two Slovak parts-making factories. The unit made 388,687 cars last year, including luxury sport-utility vehicles such as the Audi Q7, and plans similar output in 2017.

With Volkswagen’s 12,000 workers making it the largest employer in the country of 5 million, every 12 days of the strike will knock 0.1 percentage point off annual economic growth in the given quarter, the Slovak Finance Ministry has estimated.

The risk of further shutdowns may rise, as workers push for higher wages, with Kia and PSA negotiating pay increases of 6.3 percent and 9 percent, respectively, earlier this year. The labor shortage will probably only deepen next year after Jaguar Land Rover Plc starts hiring thousands of workers for a new factory and the government sees economic growth exceeding 4 percent.

Rising wage pressures “are a natural outcome of the booming economy and negative demographic development,” said Juraj Valachy, an economist at Tatra Banka AS in Bratislava. “Companies must prepare for steeper wage increases than in the past.”

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE