German automaker Volkswagen AG struck a deal with workers at its Mexican plant to avoid a strike threatened by the factory's union, the company said on Wednesday.

Volkswagen is one of the largest producers in Mexico's auto industry, which is a major supplier of cars for the U.S. market.

The company's Puebla factory in central Mexico is its only plant in North America, and the only one in the world to produce the New Beetle model.

Volkswagen said in a statement that it agreed to give workers, who had threatened to strike on Wednesday, a 6.1 percent wage increase. The union had demanded a pay raise of about 7.6 percent.

Mexico's auto industry has rebounded strongly from the crippling recession of last year, though July production rose at a slower rate than the prior month's blistering growth as the U.S. economy has recently weakened.

(Reporting by Jason Lange, editing by Gerald E. McCormick)

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