Vauxhall links new pay deal to exchange rate

At the end of April 1998, Vauxhall broke new ground in the UK by introducing a link to foreign exchange rates into a three-year pay deal that could be crucial to the future of its British plants.

On 23 April 1998, workers at the Luton and Ellesmere Port plants of motor manufacturer Vauxhall (part of the General Motors group), voted to accept a three-year pay deal. The settlement provides for a 3.5% wage rise in 1998 - below the industry average of 4.5% - a 3% increase in 1999 and a rise in line with inflation in 2000. If the exchange rate of the pound stands below DM 2.70 in three years' time, workers will enjoy an extra 0.5% rise. The deal, which is believed to be the first of its kind in UK industry, also includes some productivity-enhancing changes. It is seen in some industry circles as a pointer to changes in pay and wage structures which will occur under EU Economic and Monetary Union.

Vauxhall, which says that its exports are suffering from the current strong pound, had warned that the future of its operations in Britain depended on acceptance of the package (UK9803114N). It insists that the pay links with the Deutschmark will ensure that any benefits are shared with the workforce, if Sterling weakens.

The trade unions were claiming victory in the settlement, having feared that Vauxhall would force through sharp wage reductions to undercut other General Motors plants in Germany and Belgium. The Manufacturing Science Finance (MSF) union, representing skilled and professional workers, welcomed the new pay agreement. National secretary, Larry Brooke said: "It is very good news. The acceptance of this agreement means that the jobs of Vauxhall employees are safe and that the future of the production of Vauxhall cars in the UK is assured." He went on to say that the exchange-rate deal was agreed after four months of talks with Vauxhall which involved the Prime Minister's office and the Department of Trade and Industry.

The package received backing from the Chancellor of the Exchequer, Gordon Brown, who said that the Government was keen to encourage deals of this type. However, he ruled out any assistance from the Government in the shape of measures to curb the strength of the pound, and called on industry to improve its overall productivity levels.

General Motors had promised to manufacture the new Vectra model in Luton and invest more than GBP 200 million in the plant, but only if the deal were accepted. Vauxhall chair, Nick Reilly said: "The threat has now been lifted. We can now offer job security for our workforce along with good pay and conditions."

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