June 21, 2017 / 10:12 PM / a month ago

Strike at VW's Slovak unit extends into third day

3 Min Read

BRATISLAVA, June 21 (Reuters) - Volkswagen AG's Slovak unit and unions paused seven-hour negotiations on a wage deal on Wednesday night as a strike continued into its third day, union chief Zoroslav Smolinsky said.

"This is not a failure of talks, I am hopeful we will reach a deal when we return to the table on Thursday at 15.30 (1330 GMT)," he said in a phone interview.

About 70 percent of VW's 12,300 employees joined the protest that started on Tuesday and hit production at the biggest private employer in Slovakia, which exports virtually all of its output.

The first strike at a major Slovak plant since the 1989 end of communist rule comes as economies across Central Europe outpace Western Europe, leading to a labour shortage that many companies worry will limit growth.

On Monday, Slovak Prime Minister Robert Fico supported the action, which began as labour office data on Tuesday showed Slovakia's unemployment rate fell to 7.4 percent in May, the lowest since the global financial crisis hit central Europe in 2008.

But VW's Slovak unit said last week that union demands for a bigger pay hike would endanger the plant's competitiveness within the car group and also job stability.

The VW workers are seeking a 16 percent pay boost over two years. Management has offered 4.5 percent raise this year and 4.2 percent raise next year, plus bonuses.

VW produced 388,687 cars in Slovakia in 2016. It makes Volkswagen Touareg, Audi Q7, Volkswagen up!, Seat Mii, Skoda Citigo, and bodies for the Porsche Cayenne.

The company pays an average wage of 1,800 euros ($2,010) a month, double the national average.

That figure is also higher than the average salary of 37,000 crowns ($1,577) that VW pays at its Czech carmaker Skoda Auto.

Slovakia's Finance Ministry has estimated that 12 days of an uninterrupted strike would cut 0.1 percentage point off the country's annual economic output.

Growth is seen at 3.3 percent this year and above 4 percent in coming years, with the auto sector the most important driver. Slovakia, with a population of 5.4 million, produces more than 1 million vehicles a year, making it the biggest per-capita auto producer in the world.

Besides VW, Kia Motors Corp and Peugeot SA have plants in Slovakia. Jaguar Land Rover is building a plant due to open next year.

Peugeot and Kia have raised wages at their Slovak plants by 6.3 percent and 7.5 percent, respectively. ($1 = 0.8957 euro) (Editing by Matthew Lewis)

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