By Daina Beth Solomon

MEXICO CITY (Reuters) – The new independent labor union at General Motors Co’s largest plant in Mexico is seeking a 19.2% wage increase, citing surging inflation, and the U.S. carmaker has countered with an offer of 3.5%, the head of the union SINTTIA told Reuters.

GM would not confirm the percentage of its counter-offer but said its next meeting with the union is on Thursday, where it hopes to reach a deal for the plant in the central city of Silao, forestalling a May 31 deadline for workers to strike.

The GM labor negotiations are a high-profile test case for a new trade deal’s goal of reducing the vast wage gap between U.S. workers and their Mexican counterparts.

SINTTIA’s proposal would boost wages at the plant that makes GM’s profitable Silverado and GMC Sierra pickups to as much as 135 pesos ($6.62) an hour, based on a copy of the most recent collective contract seen by Reuters.

That would still be much lower than the company’s U.S. starting wage of $17.50 an hour. The wage disparity drove U.S. insistence on tougher labor rules in the United States-Mexico-Canada Agreement (USMCA), the 2020 trade pact that replaced NAFTA.

SINTTIA’s Secretary General, Alejandra Morales, called GM’s counter-offer “a slap in the face” at a time when workers are cutting back to cope with rising prices, noting many mid-level employees make about $3 an hour.

The first major talks held under the new trade deal could usher in similar demands at other companies in Mexico if SINTTIA lands a big raise. U.S. government officials who have long wanted to lessen the wage disparity with Mexico are closely watching.

SINTTIA, the Spanish acronym for the National Independent Union of Automotive Industry Workers, made its 19.2% proposal when talks started last month.

Morales said that on top of galloping inflation, the salary increase was merited due to an uptick in production, years of lost purchasing power and the peso’s sliding value while GM’s profits are in stronger U.S. dollars.

A 3.5% increase would be less than half of current inflation.

Talks stalled April 12, and Thursday’s session will be mediated by federal labor officials.

The USMCA labor provisions were partially meant to help Mexican workers elect unions they feel will best fight for their interests, breaking the grip of business-friendly groups that operated behind workers’ backs for years as cheap labor lured companies to Mexico.

GM is under pressure to keep costs low as it faces off with the first major independent Mexican union to sprout up since the start of the new trade deal. A victory for the 6,300 workers in Silao could spur higher demands at its other Mexico sites and across the auto industry, experts say.

“That could be a game changer,” said Harley Shaiken, a labor scholar at the University of California at Berkeley.

A union dispute at the same GM plant last year prompted U.S. officials to lodge the first USMCA labor complaint, threatening tariffs on GM’s Silao pickups if the company did not guarantee worker rights.

Workers ended up ousting the massive union that had been in power for 25 years and elected SINTTIA, a fledgling group led by fellow workers and supported by international activists.

Morales said workers would back a strike, but employee Jose Camarillo said he was skeptical SINTTIA could achieve a 19.2% jump in one go.

“It’s a huge increase, a crazy number,” he said.

($1 = 20.3649 Mexican pesos)

(Reporting by Daina Beth Solomon; Editing by David Gregorio)