(FT) Warning over Portugal car plant after strike

Warning over Portugal car plant after strike

By Peter Wise in Lisbon, Source: FT.com

A labour dispute over Saturday working could jeopardise expansion plans at a VW car plant that is one of Portugal’s biggest export earners, officials warn.

Management and trade union representatives are due to hold talks on Thursday after a 24-hour strike last week halted production at VW’s AutoEuropa plant south of Lisbon. The unit is Portugal’ssecond-largest exporter.

The stoppage – at a time when Portugal is seeking to build on its recovery from the eurozone economic crisis – came a week after VW unveiled the T-Roc, its smallest SUV to date, a move seen as part of the German automaker’s response to the diesel emissions scandal.

After the strike António Costa, prime minister, said “stability” at AutoEuropa, the largest direct foreign investment in Portugal, was of the “utmost importance to the growth of the economy”.

Initial production of the car has already started in Portugal but a failure to resolve the dispute could threaten plans to almost triple output at AutoEuropa and damage the plant’s longstanding reputation for good labour relations.

Workers voted to strike after management proposals to move to a six-day production week, with obligatory Saturday working in exchange for a pay rise, were rejected in a secret ballot by almost 75 per cent of the plant’s 3,400 employees. The plan had previously been accepted by the workers’ commission, an independent body elected by employees. But the commission resigned after seeing trade unions opposed to the proposals prevail in the vote.

VW said 41 per cent of the workforce took part in the strike.

Fernando Sequeira, outgoing head of the workers’ commission, has warned that part of the production of the T-Roc could be moved out of Portugal, possibly to Germany, if an agreement cannot be reached.

Miguel Sanches, AutoEuropa’s director-general, told the Jornal de Negócios that a partial relocation of production was a possibility, but that the company was trying to keep full production in Portugal. A deal cannot be struck, however, until a new worker’s commission is elected in October.

Trade unionists critical of the strike say the dispute not only risks some of the 2,000 jobs VW plans to create to produce the T-Roc, but also hundreds of new jobs at firms that supply the plant. Union officials that backed the stoppage said workers had voted overwhelmingly against Saturday working and a new work schedule that would see them have only two consecutive days off every three weeks.

Producing the T-Roc would significantly lift VW’s contribution to Portugal’s exports and national output. In 1996, AutoEuropa accounted for 12 per cent of the country’s exports and 2.1 per cent of gross domestic product. By last year this had fallen to 3 per cent of exports and 0.8 per cent of GDP.

Mr Costa’s political opponents blame the dispute on a power struggle at the plant between worker representatives close to the Left Bloc (BE) and the Communist Party (PCP), which provide his minority Socialist government with crucial support in parliament. Union representatives linked to the PCP see the dispute as a chance to press the government for policy concessions, according to Maria Luís Albuquerque, a former finance minister and senior official in the centre-right Social Democrats.

Jerónimo de Sousa, the PCP leader, this weekend dismissed the suggestion of party interference as “nonsense”, saying “workers naturally react when fundamental rights are sacrificed in the name of competitiveness”.

Amid stiff competition from other plants, VW chose AutoEuropa as the exclusive European producer of the T-Roc. Initial production began in August and the first cars are due to go on sale in November. The new SUV will also be made in China and the US. As part of VW’s plans to increase production at AutoEuropa from 85,000 cars in 2016 to almost 240,000 next year, it wants to introduce a six-day production week.

The workers affected have been offered an average pay increase of 16 per cent, an extra day of annual leave and a shorter working week totalling less than 40 hours. Workers opposed to the plan, however, want to be paid overtime rates for working on Saturdays, implying a bigger wage increase.

Portugal’s economy grew 1.4 per cent last year and EU authorities expect that to increase to 1.8 per cent this year, while unemployment has dropped from 11.2 per cent in 2016 to 8.8 per cent in the second quarter of this year, the lowest since 2009.

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