CHATTANOOGA, TN—Volkswagen is giving workers at its assembly plant here a 10 percent pay raise as the COVID-19 omicron variant stretches an already-tight labor market.

On Jan. 7, the German automaker reported U.S. sales of 375,030 vehicles for 2021, a 15 percent jump from the prior year. The performance was led by the Atlas, VW’s three-row SUV made in Chattanooga, and the Tiguan midsize SUV. VW delivered 16,742 units of its electric ID.4 SUV, which it plans to begin building in Chattanooga in the second half of 2022.

Across the industry, U.S. auto sales will likely be stuck at 15.5 million this year because of tight supplies of semiconductor chips. At the same time, the auto industry is grappling with higher rates of absenteeism because of the spread of the virus.

VW’s Chattanooga plant had been closed for several weeks due to the Christmas holiday and chip shortages, but resumed production Jan. 10.