Mexico VW Strikers Yield to Order but Signal New Stance for Unions

Workers at Volkswagen’s only North American assembly plant agreed Wednesday to a federal order to end their five-day strike. But the walkout sent a strong signal that Mexican labor won’t be as docile in the years ahead as it was under the thumb of past governments.

A Labor Ministry arbitration board late Tuesday declared the strike illegal on technical grounds and ordered the 12,600-strong work force to return their jobs by midnight Wednesday and to abandon their strike for higher wages.

At a meeting near the plant in the central city of Puebla, employees agreed to return to work rather than risk being fired. Union leaders were to resume wage negotiations with management late Wednesday.

The strike stopped daily output of 1,540 Jettas, Golf convertibles, New Beetles and old-design Bugs, causing losses of about $5 million a day. The Puebla plant is the sole source of the newly designed Beetle, a hot-selling model in the U.S. market.

But the mood of confrontation persisted, suggesting that President-elect Vicente Fox could face more aggressive worker pressure for a bigger slice of the growing Mexican economic pie after years of labor belt-tightening.

After taking down the red-and-black strike banners that had covered the gates at VW, one of Mexico’s largest factories, the workers marched to the city’s main square to protest the government’s intervention in the strike. And union President Jose Luis Rodriguez told reporters the union planned to appeal the arbitration board’s ruling, which he called a violation of the constitutional right to strike.

The Institutional Revolutionary Party, or PRI, had cozy relations with trade unions during the party’s seven decades in power. In recent years the PRI--voted out of power with Fox’s election in July--relied on pliant unions to accept minimal wage increases in return for job security and social benefits. The Labor Ministry said there have been just 15 strikes this year during some 70,000 contract negotiations.

In contrast, the VW union is part of a growing independent union federation formed in 1998 that is not beholden to any party. That organization, the National Workers Union, has sought to restore labor’s traditional right to challenge management in collective bargaining negotiations.

Some analysts see this as a healthy step toward competition in a tight labor market with record-low unemployment. Others worry it could undermine a major attraction of Mexico for industrialists: cheap, docile labor.

VW made a veiled threat Tuesday that future investment in Mexico was at risk, saying: “The eruption of the conflict and the unreasonable demands of the union compromise dramatically the future growth of the firm, its suppliers and dealers and seriously affect the confidence of investors in Mexico.”

But Mexico has become attractive to foreign manufacturers for more reasons than cheap labor. The free-trade relationships with the U.S. and Canada have transformed the country into a major exporting platform.

The independent federation’s leader, Francisco Hernandez Juarez, was closely involved in the VW strike and led the protest march Wednesday. His involvement raised the stakes of the strike as unions jockey for position ahead of Fox’s inauguration in December.

Last month, Fox met with Hernandez Juarez and other independent union leaders, who pressed their case for more autonomy on labor relations during Fox’s administration.

“Neither the government nor political parties can assume the task that corresponds to the productive sectors; the initiative should come from businesses and workers, and they alone should participate in this process,” Hernandez Juarez said at the time.

VW’s strong financial performance was central to the union’s initial demand for a 35% pay increase, far above expected inflation this year of just below 10%. The union reduced its pay demand to 20% and the company moved up to a 12% offer, but there the talks deadlocked.

The Germany-based auto giant does not disclose financial results by country, but reported that Mexico production in 1999 reached a record 410,000, and first-half production this year is running 10% ahead of last year.

Much of the plant’s output goes to the United States. The company noted U.S. sales were up 19.4% in the first half of 2000, to 179,651 vehicles.

That performance is consistent with Mexico’s booming export sector, including the maquiladoras, or assembly factories, concentrated along the U.S. border. Some firms have reported problems recently finding enough skilled workers, yet pay in such factories has barely risen, infuriating union leaders.

Antonio Villalba, head of foreign relations for the Authentic Workers Front, one of Mexico’s most aggressively independent unions, said, “We think that with the fall of the PRI on July 2, new possibilities have opened for the union movement.”

Francisco Zapata, a labor researcher at the Colegio de Mexico, predicted more difficult negotiations with oil, electricity and government workers as well as tougher talks with the growing independent labor movement as the PRI’s power over the Confederation of Mexican Labor fades.

“And a testing ground is the VW strike at the moment,” Zapata said.