The contract was negotiated at VW's headquarters in Germany and presented by union officials as a way to preserve jobs. The auto workers walked off their jobs when negotiations reached a stalemate after plant managers refused to reverse the layoff of 3,000 workers. Union leaders called the termination an act of "aggression, truculence, cowardice, and terrorism." Previous to the agreement the union had accused the company of "blackmail" for using the threat of the layoffs to force the agreement .

In negotiations, VW officials demanded the pay cut while promising some job security for the workforce through 2006. Of the 3,000 workers that were dismissed last week, only 1,500 have gone back to work, with the other 1,500 remaining out on paid leave until January 31. The agreement also calls for placing 700 workers in a "voluntary" retirement program.

Immediately after the agreement was signed the company announced that jobs will be tied to overall sales. "The guarantee of employment is linked to the behavior of the Brazilian market," said VW Brazil president Herbert Demel to the press after the agreement was approved.

VW operates five plants in Brazil and employs 26,800 workers. It's the largest private company in Latin America's biggest economy. Faced with sharp competition, VW has been moving to cut labor costs and pressure the unions in São Paulo. Automakers have been shifting production out of São Paulo to other states where the average wages of auto workers are 30 percent lower. Between 1995 and 1999 companies have moved close to 600,000 jobs out of São Paulo.

"I think that we are all relieved," said Demel about the outcome of the strike. "We secured a mature accord, but the road was a little rocky," he added.

José Pastore, a consultant to the National Industry Confederation, praised the outcome of the negotiations by saying that the unions "have become more professional, realistic and better informed."  
 
 
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