MEXICO CITY: German carmaker Volkswagen AG has agreed to a 5.5 percent salary increase for workers in Mexico and another raise for next year, the company's Mexican union said, averting a potential strike.

The deal comprises the wage rise plus a 1 percent increase in the workers' savings fund and the indexation of food allowance vouchers, the independent union of Volkswagen workers (SITIAVW) said in a weekend statement published on Twitter.

Labor and employers' representatives also agreed on a raise equivalent to inflation plus 2 percent scheduled for 2019, it added. That would be split between a 1 percent salary hike and 1 percent for the savings fund and food vouchers, the union said.

The deal for workers of Europe's biggest carmaker was reached after two weeks of negotiations, the SITIAVW said.

Volkswagen's operations in Mexico are based in the central city of Puebla, where it has one of its biggest plants.