Volkswagen Mexico has agreed to raise workers' pay and benefits by 5.46% in a new collective contract, a local union said on Tuesday.

Due to the coronavirus crisis, Volkswagen opted to freeze worker pay in Germany this year.

Manuel Aburto, a spokesman for the Independent Union of Automotive Industry Workers (SITIAVW), confirmed the deal with Volkswagen.

He said it is a new 2020-21 collective contract comprised of a 3.62% worker pay raise and a 1.84% rise in "benefits." He did not specify what exactly the benefits are.

The 3.62% increase is in line with the rate of inflation recorded in Mexico for July, said Reuters.

The push for a raise comes a year after the union and Volkswagen agreed to hike up worker pay by 6.58%.

Aburto said Wednesday that the union has already submitted its demand for a 12% pay hike to the federal Labor Ministry, Mexico Daily News reported. Their demand does not include benefits.

No Delays Despite the Pandemic

Many of them also voted for prompt negotiations regarding the salary-raise despite the tough times Volkswagen is going through due to the coronavirus pandemic.

Workers have a hard time getting more pay raises since the pandemic took hold of most of the world in February. The economy suffered badly from the health crisis.

Volkswagen could argue that this time is not the right one to give workers higher salary packages.

The pandemic caused a decline in vehicle production by 54% in the first half of the year compared to the same period of 2019.

According to the national statistics agency, Inegi, Volkswagen made 106,707 cars from January to June 2020. It is significantly smaller than the 234,190 vehicles they produced in the first six months of last year.

"It is a feat given these difficult times, including the pandemic and the work situation," Aburto said in a phone interview with Forbes Mexico. He also added that more details on the deal would be provided in due time.

Volkswagen's plant in the central state of Puebla is one of the largest auto plants in Mexico. It had 11,364 workers as of May. The count includes administrative and technical staff.

They make the Tiguan, Jetta, and Golf models for sale in the United States, Mexico, and other markets.

Threats to Strike Over Worker Pay

Its unionized workers sought a 12% wage increase and threatened to hold a strike if the demands weren't met by August 18.

The company clearly dodged this from happening, as the new deal came after more than three weeks of negotiations, Auto News Europe reported.

In a statement, the company said the deal would take effect at 11 a.m. local time on Tuesday.

Also, in the statement, Volkswagen highlighted how the deal was agreed upon "in the midst of an unprecedented public health and crisis."

It was forced to freeze local operations for more than three months to contain the virus's spread.

As for the German metalworkers' union IG Metall, the company said in April that they had reached an agreement to keep its prior wage agreement in place until December. No pay rises are expected until then.

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