Czech VW unit Skoda Auto workers walk out over pay

...their demands for more than 12 percent pay increase over two years.

"We opted to strike in the workplace," one union member said on Czech TV after unions began striking at 6 a.m. (0400 GMT), adding work would resume as soon as the unions and management reach an agreement.

The unions had planned a three-hour warning strike but decided that each shift would strike for several hours each day in a way that will likely halt production at the company's three plants in the Czech Republic altogether, union officials said.

Local newspapers reported the strike will prevent Skoda from making a single of its usual 2,500 vehicles on Tuesday, which will result in losses of about 55 million crowns ($2.67 million) for the firm.

Skoda last week cut its earlier wage rise offer and now says it is ready to raise base wages by 7.5 percent this year and 3 percent next year. It is also offering to raise various benefits, for an overall pay increase of about 12 percent over two years.

The unions have demanded more, plus a guarantee that a significant pay hike this year is followed by another raise in 2008 that would match inflation, which has hovered below 2 percent in past months, but is expected to creep higher.

Skoda is the largest Czech company with sales of 203.7 billion crowns ($9.88 billion) last year, the country's largest exporter and a key customer of dozens of parts makers.

The Skoda Auto group employed 27,680 people at the end of 2006. The average gross manual worker's wage at Skoda is 22,000 crowns, 10 percent above the average wage in the country.

Analysts say a union's success at Skoda could spark a wider wage pressure that may feed into inflation and raise interest rates.