Volkswagen Mexico workers reject union's 9% raise deal, as inflation climbs

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Volkswagen Tiguan cars are pictured in a production line at company's assembly plant in Puebla, Mexico, July 10, 2019. REUTERS/Imelda Medina

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MEXICO CITY, Aug 9 (Reuters) - Workers at Volkswagen AG's (VOWG_p.DE) main Mexico factory have rejected their own union's deal with management for a 9% pay raise, setting the stage for further talks just as inflation hits a 22-year high.

Volkswagen de Mexico on Tuesday said it was committed to "constructive dialogue" with the union after the unexpected rejection in a vote last week on what would have been the biggest automaker raise in Mexico in recent years.

The plant's Independent Union of Automotive Workers (SITIAVW) last month announced the proposed raise for its 7,000 workers in the central state of Puebla, where Volkswagen makes cars including the Jetta and Tiguan, topping a recent 8.5% pay hike at a General Motors Co (GM.N) facility in Guanajuato. read more

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Yet workers, who needed to sign off on the deal, ultimately appeared dissatisfied with the negotiated raise, SITIAVW said.

Volkswagen said the month-long negotiation took into account supply chain snags that have made operations costlier and the semiconductor chips shortage that has hit production for more than a year.

"We are surprised the vote results did not reach a wide majority in favor," it said in a statement.

The contract was set to last two years, with pay to be negotiated again in one year. Union salaries at the Puebla plant - some of the highest in Mexico's auto sector - range from about $15 to $48 a day.

SITIAVW told Reuters it was waiting for labor authorities to approve the results of the Aug. 5 poll before taking further steps. The union held meetings and distributed flyers to explain the agreement ahead of the vote, it said.

SITIAVW, one of Mexico's strongest independent unions, initially sought a raise above 15%, citing inflation. Last year, it agreed to a 5.5% increase with Volkswagen.

Mexican annual inflation reached its highest level in nearly 22 years in July, data showed on Tuesday, with prices rising 8.15% in the year. read more

In other recent pay deals, Nissan (7201.T) agreed to a 6.5% increase and Mazda (7261.T) 5.5%.

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Reporting by Daina Beth Solomon; editing by Stephen Eisenhammer and Will Dunham

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