Labour agreements
Volkwagen workers in Chattanooga ratify first UAW union contract, Mexico publishes reform reducing workweek to 40 hours
On February 19, 2026, VW workers in Chattanooga, Tennessee ratified their first collective bargaining agreement with the United Auto Workers (UAW) union, bringing a general wage increase of 20%, plus healthcare cost reductions, job security guarantees and an enforceable grievance procedure. Meanwhile, the Mexican government has passed a constitutional reform reducing the maximum workweek from 48 hours to 40 hours from 2030.
The Volkswagen Group of America Chattanooga Plant in Tennessee, located around 214km southeast of Nashville, is Volkswagen’s North American hub for electric vehicle assembly. It is here that the automaker assembles the all-electric ID.4, the Atlas and the Atlas Cross Sport, and where it houses the high-tech Battery Engineering Lab.
More than 3,000 Volkswagen workers in Chattanooga voted three-to-one to join the UAW in April 2024, and in October 2025 workers voted to authorise strike action after over a year of contract negotiations. A tentative agreement was reached between VW and the UAW in early February 2025, which was ratified by the end of the month after 96% of workers voted in favour of the agreement.
"This milestone reflects our shared commitment to competitive wages, strong benefits, and the long‑term success of our employees and operations," a VW spokesperson said. "We look forward to building a strong future together in Chattanooga."
"Volkswagen workers have moved yet another mountain,” commented UAW president Shawn Fain. “From having the courage to stand up and form their union, to having the backbone to authorise a strike and hold out for a contract that honours their worth, VW workers are leading the way for the entire labour movement and non-union autoworkers everywhere."
Figure 1: Incremental general wage increases (GWIs) under the now-ratified VW and UAW agreement
| Date | Production GWI | Production Top Wage | Skilled Trades GWI | Skilled Trades Top Wage |
|---|---|---|---|---|
| On Ratification | 5% | $34.02 | 5% | $43.05 |
| February 2027 | 3% | $35.04 | 3% | $44.34 |
| February 2028 | 3% | $36.09 | 3% | $45.67 |
| February 2029 | 3% | $37.17 | 3% | $47.04 |
| February 2030 | 6% | $39.41 | 6% | $49.86 |
In addition to incremental general wage increases (GWIs), outlined in Figure 1, active UAW members will receive a $4,000 bonus upon ratification of the contract and a further $2,550 annual bonus for the length of the contract – which is four years. Also negotiated in the contract are cost of living adjustments, profit-sharing payouts, attendance bonuses, job security commitments, healthcare premium rate reductions, improved holidays and a new grievance procedure.
It also sets out rules surrounding production standards, overtime and shift schedules. Union members will now receive advance notice of any supply chain disruptions, as well as plant shutdowns, schedule changes and any changes to the daily production number and model mix.
More labour agreements in North America
This latest contract is the first of its kind for VW in Chattanooga, but its not the only contract agreed the UAW has agreed with and an automotive manufacturer in North America in the past year. In March 2025, UAW members voted to ratify their first local agreement with Ultium Cells, a joint venture of General Motors and LG Energy Solution, for workers at the Ultium Cells battery plant in Spring Hill, Tennessee.
“Southern autoworkers are standing up, and I expect many more to follow Volkswagen’s lead,” said UAW region 8 director Tim Smith, following the ratification of the VW-UAW agreement in Chattanooga. “Workers are done being left behind, and VW is just the first step towards justice for autoworkers everywhere."
Further north, UAW members in Bloomfield, Connecticut ratified a contract with Cummins on October 5, 2025, that confirmed a 15% general wage increase, as well as more holidays and sick days, and increased profit sharing for workers at the Cummins facility in Bloomfield. This came just days after nearly 240 members of the union began an unfair labour practice strike, with a tentative agreement made that day and ratified the following week.
Mexico to mandate 40-hour maximum workweek
This kind of pressure on automakers surrounding pay, benefits and working conditions is not limited to the US. In Mexico, president Claudia Sheinbaum signed a decree reforming Article 123 of the Mexican constitution reducing the workweek from 48 to 40 hours. Mexico's Chamber of Deputies approved the constitutional reform on 25 February, 2026, and was published in Mexico’s Diario Oficial de la Federación (DOF) on March 3, when the reform entered into force as law.
Figure 2: Annual reduction of the maximum legal workweek in Mexico (2026-2030)
| Year | Maximum Legal Workweek |
|---|---|
| 2026 | 48 hours (current law) |
| 2027 | 46 hours |
| 2028 | 44 hours |
| 2029 | 42 hours |
| 2030 | 40 hours (final target) |
The change is not sudden, and the maximum legal workweek will be reduced on an annual basis by two hours at a time, as outlined in Figure 2.
This reform could have a number of consequences for the automotive supply chain in Mexico. As the decree ensures no reduction in wages or benefits – making sure salaries for full-time employees remain the same even as hours decrease – any production beyond 40 hours per week (from 2030) will be considered overtime. If shifts are not adjusted accordingly, this could lead to a significant rise in labour costs for automakers.
Therefore, a fundamental restructuring of production scheduling and standard shift will be crucial to minimising the financial cost of this change. As traditional 48-hour weeks often relied on six-day production schedules or longer shifts, manufacturers might look to optimise three-shift rotations, possibly reducing daily hours per shift or adding additional shifts.
A study conducted by HR firm Kelly Services México in 2025 found that 55% of automotive industry leaders supported the move towards a 40-hour workweek. However, 29.67% said they expect shift reorganisation as a result, while 23.44% expect higher labour costs and 10.05% expect the need for increased automation.
“It is crucial to consider the operating model of our industry – three shifts, seven days a week, 365 days a year,” said Rogelio Garza, president of the Mexican Automotive Industry Association (AMIA), during the third national forum on the reform in June 2025. "This setup enables us to produce 14,000 vehicles daily across 20 assembly plants, eight engine plants and seven transmission facilities."
Garza also emphasised the importance of regaining certainty in terms of international trade as a key priority for the automotive sector in Mexico. “Before advancing with labour reform, we believe the government should first resolve pending issues related to tariffs and the review of the USMCA agreement," he said. "Understanding the final terms among the three countries is essential to accurately assess the impact on our operations,”
In her morning press briefing on March 4, president Sheinbaum clarified that under the new labour reform, rest days may vary depending on the nature of the job, with some workers receiving two days off, while others might receive three – and overtime paid as needed – reflecting agreements between employers and unions. She reiterated that "in no case shall the reduction of the workweek imply a reduction in wages, salaries or benefits.”
Automakers in Mexico will have a lot to consider following this constitutional reform, but the gradual reduction over the course of the next five years should give them time to adapt and find effective solutions that limit the impact on cost and productivity.
