Volkswagen Jetta, New Beetle Plant Goes on Strike

Just as the Cash for Clunkers program finally started to put some life back into the North American auto market, Volkswagen AG suffered a major blow this week when its Puebla, Mexico plant went on strike. Although the strike will not affect customers going into the last weekend of the stimulus program, it will likely cause longer delays for the Volkswagen Jetta which is already seeing a six-month waiting list for certain models. The strike is the result of a wage dispute between VW and the union of its employees in regards to pay increases and bonuses, and talks are continuing by both sides to end the work stoppage.

As far as the demands of the Mexican workers, reports from the Associated Press and Reuters are conflicting with each reporting desired wage increases of 8.25 percent and 3 percent, respectively, but both are reporting matching figures for Volkswagen’s counteroffer – a wage increase of 1 percent plus a one-time cash bonus of 5,500 pesos (or around $430). VW’s Puebla Assembly Plant employs approximately 9,400 workers and produces about 1,500 cars per day, while its unionized workers bring home an average of 370 pesos (or less than $30 per day).

This strike comes at a pivotal time for the Mexican manufacturing industry which is expected to lead to an economic recession in 2009 that is unrivaled since 1932. Like the rest of the worldwide automotive market, Mexico is also experiencing sales and production decreases compared to last year. Compared to July 2008, Mexico’s production output fell 25 percent, and with Volkswagen one of the biggest manufacturers in Mexico, this number is sure to climb following the strike.

The plant is the sole production line for the Volkswagen New Beetle and supplies North America with the Jetta. VW recently announced that this plant would also build a small car, currently dubbed the New Compact Sedan, starting next year. Both sides seem confident that the strike will not last long.