Stakes High for Both Sides as VW, UAW Begin Bargaining

The future of Volkswagen’s Chattanooga, TN, assembly plant hinges on the outcome of contract negotiations between the automaker and the UAW, according to a white paper produced by the Center for Automotive Research (CAR) in Ann Arbor, MI.

“Volkswagen and union workers around the world have a long history of successfully building vehicles together, and we are jointly committed to a strong and successful future at Volkswagen Chattanooga with the UAW. We share many common goals: providing a positive working environment where employees are well compensated for their hard work building quality vehicles and share in the company’s success,” according to a recent statement approved by VW and the UAW.

Hourly workers at Chattanooga voted in April by a 73% margin to join the UAW. Both VW and the union say they are focusing on collective bargaining and negotiating in the spirit of working together to reach a fair agreement. Both are declining further comment on the progress of the talks.

The UAW’s successful unionization of VW’s Chattanooga plant represents the first victory in a campaign to organize the 13 non-unionized automakers in the U.S.

The challenges of aligning Chattanooga’s labor contract with the UAW-Detroit Three agreements are significant, particularly in terms of balancing labor costs with the health, safety and job security of the workers. Further, this will be a significant development in the complex process of determining the viability of motor vehicle assembly plants in the U.S.

Based on publicly available data and CAR estimates, substantial differences exist between the base wages and the workforce arrangements of workers at the Chattanooga plant and those at the Detroit Three assembly plants. The top wage of a regular full-time worker at Chattanooga is estimated at $32.40 per hour.

On the other hand, the top wage at the Detroit Three plants is 11% higher at $36 per hour. Additionally, the wage rate difference for temporary workers can be as high as 40%, according to Yen Chen, principal economist at CAR and the author of the white paper.

“If the current ratio of temporary to regular workers in the Chattanooga plant remains unchanged, adopting Detroit Three’s wage rates and wage rate progression would increase the Chattanooga plant’s labor costs by 25% this year and by up to 50% by 2027,” he notes.

The plant’s current products, the Atlas, and the battery-electric ID. 4, are high-volume, mass-market products which are also made in plants outside the U.S. The Atlas, known as the Teramont outside of North America, and the ID. 4 are sold globally.

Nevertheless, Chen says Chattanooga’s production is mainly for the U.S. and Canadian markets. Maintaining the plant’s competitiveness and profitability while negotiating a contract with terms as favorable as those the UAW secured with Detroit Three could be a challenge, he says.

The union’s success in Tennessee marks a significant milestone – the first unionized foreign-owned light-duty vehicle plant in the South – and could “be the first domino to fall,” as UAW President Shawn Fain has said.

The UAW has unionized other foreign-owned light-vehicle plants in the U.S., such as VW’s Westmoreland assembly plant near New Stanton, PA, and Mitsubishi Motors’ assembly plant in Normal, IL, now owned by BEV maker Rivian. However, VW’s Pennsylvania plant closed in 1988, and Mitsubishi’s Illinois plant ceased operation in 2015.

However, the reasons behind the closure of each plant are complex, with unionization not being the exclusive cause, Chen notes.

“The major reasons for a plant closure may include having the wrong products at the wrong time, which in turn may lead to low or negative product profitability and low plant capacity utilization,” he says. “The viability of plant renovation and investment depends on the plant’s age, location, labor force condition and the company’s financial condition, all of which also play a significant role in a plant closure decision.”

Meanwhile, the UAW is continuing its campaign at the Mercedes-Benz assembly complex in Vance, AL, where the employees in mid-May voted down union representation. With 90% of the employees voting, the tally was 2,045 for the union and 2,642 against.

The UAW, however, is challenging the outcome of the election, alleging the German automaker fired four pro-union workers, forced workers to attend anti-union meetings and interfered with workers’ ability to advocate for the union during the voting.

The National Labor Relations Board’s regional director in Atlanta will review the UAW’s allegations. After a hearing where both the company and union present their cases, a new election could be ordered if the employer’s conduct was found to have impacted the outcome.

Mercedes-Benz says company officials “worked with the NLRB to adhere to its guidelines and we will continue to do so” through the objection process. The automaker says it “sincerely hoped the UAW would respect our team members’ decision.”