FRANKFURT -- Volkswagen Group 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.
VW agreed a 4.8 percent pay increase with Germany's powerful IG Metall labor union for around 120,000 workers at the carmaker's western German factories including the main plant in Wolfsburg.
The union had sought a 5 percent pay rise over 12 months. Under a collective wage-bargaining deal struck today, VW salaries will rise by 2.8 percent on Sept. 1, 2016, and by a further 2 percent on Aug. 1, 2017.
Employees will also receive a 200-euro pension contribution. The new wage agreement runs until Jan. 31, 2018.
"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 a statement. "This is an essential prerequisite for improving our competitiveness.”
The agreement underscores the far-reaching influence workers have at Volkswagen. Labor representatives account for half of the 20 seats on the VW’s supervisory board and can block important decisions.
Last week, VW granted German workers 3,950 euros in profit-sharing bonuses. Profit-sharing will be calculated on a two-year basis under the new contract, Volkswagen said today,
VW 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.
VW Group last month reported a 4.1 billion euro ($4.6 billion) operating loss for 2015 due to huge provisions for the costs of its emissions test-rigging scandal. 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.
Reuters contributed to this report