UAW Vote Won’t Deliver Death Blow to Either Side

No matter which way the vote tilts this week in the UAW’s drive to organize Volkswagen’s Chattanooga, TN, assembly plant, it is unlikely there will be seismic swings in the U.S. auto industry’s wage scale and work practices or the union’s long-term viability.

The rhetoric portraying the vote as some sort of industry Armageddon hit a fever pitch this week heading into the scheduled Feb. 12-14 referendum, most of it emanating from political factions that fear unionization will have a chilling effect on new investment in the state.

On Monday, Republican state Sen. Bo Watson indicated he would vote against any future proposals for tax breaks on new investment if workers opened the door to the union. “I believe any additional incentives…for expansion or otherwise will have a very tough time passing the Tennessee Senate,” he is quoted as saying.

U.S. Sen. Bob Corker on Tuesday broke an earlier vow of neutrality, calling on workers to turn down unionization.

“The key to (the UAW’s) survival is to come down and organize plants in the Southeast,” the Republican says. “It’s about money and it’s about power.”

Billboards around Chattanooga depict the 60-year-old ruins of the Packard plant in Detroit and the warning, “Detroit: Brought to you by the UAW.” And detractors have been equating a vote for the union with a vote for gun control.

On the surface, the opposition’s strategy of damaging Volkswagen’s business case would appear counterproductive to the state’s goal of economic development and jobs growth. VW still has a chip to play in Tennessee as it firms up plans to build a new midsize CUV targeted for 2016, with Chattanooga the most logical target for new investment, unless the environment becomes hostile.

“This turns the conventional Republican ideology on its head,” Harley Shaiken, professor-labor relations for the University of California at Berkeley, says of the political opposition now facing the German automaker in Tennessee. “Normally, they’d say, let VW be VW.

“There could be legal issues for holding the plant hostage by threatening future investment,” he adds.

State Rep. Sherry Jones, a Democrat, calls Watson’s comments “an outrage.”

“The fact of the matter,” she says, “is that the (General Motors) plant in Spring Hill has had union representation for decades, and the only result has been a better working relationship between management and workers, resulting in higher productivity and better wages for employees.”

Volkswagen cited incentives, weather and logistics when it chose Chattanooga as the site for its new $1 billion factory over the two other finalists, Alabama and Michigan.

State and local governments reportedly kicked in $557 million in tax breaks and other spiffs, but VW executives told WardsAuto in 2008 they also factored in the likelihood of snow or tornadoes disrupting production, labor costs and availability of suppliers in making their decision.

The operation, which launched production of the Passat sedan in 2011, reportedly has generated 5,000 jobs in the region.

Chattanooga, China Only VW Plants Without Works Council

Politicians have stepped into the fray, because VW not only has pledged to remain neutral in the debate, it has gone a step further, signaling unionization might be a good fit with its organization worldwide.

Among VW plants, only Chattanooga and facilities in China remain non-union and without a works council to represent employees on pay, working hours and benefits and provide a say in the company’s overall direction, says Kristin Dziczek, director-Industry & Labor Group for the Ann Arbor-based Center for Automotive Research. A works council can’t be established legally in the U.S. unless there is union representation.

“The Volkswagen Group is proud of its record of cooperation and co-determination between employees, management and the communities in which we live and work,” says Volkswagen Chattanooga CEO Frank Fischer. “Our works councils are key to our success and productivity. It is a business model that helped to make Volkswagen the second-largest car company in the world.

“Our plant in Chattanooga has the opportunity to create a uniquely American works council, in which the company would be able to work cooperatively with our employees and, ultimately, their union representatives.”

Sebastian Patta, vice president-Human Resources at the plant, says: “Democracy is an American ideal, and being open with our employees is a central pillar of our works councils. Outside political groups won’t divert us from the work at hand: innovating, creating jobs, growing and producing great automobiles.”

That sentiment, plus reports the UAW has secured signed cards from half the workforce, has UC Berkeley’s Shaiken believing the union may succeed in breaking through at Chattanooga.

“One never knows until the votes are counted, but the signs are good for this being an historic moment for VW and the UAW,” he tells WardsAuto. “This is being closely watched, and if the workers vote yes, we could see other automakers in the South or other workers moving in this direction.”

Much has been made of the importance of the vote to the union and what it could mean for auto industry wages and work practices throughout the U.S., should the UAW succeed as Shaiken predicts.

But it appears unlikely there would be a near-term power swing sparking a union march on the South or that past industry labor practices, in part blamed for the near-collapse of the domestic auto industry in 2009, would rise again on the strength of the Chattanooga plant’s move under the UAW umbrella.

For its part, the Volkswagen operation is just the first play in a longer game designed to reverse the slide in UAW membership, which has declined 75% over the past three decades. Although it could happen, it’s unlikely a victorious union would make an immediate and contentious push for significantly higher wages in Chattanooga and risk its longer-term goal of organizing other foreign transplants in the U.S.

The UAW’s Chattanooga endgame is to demonstrate it can work in partnership with a German automaker, help protect employees from job-related injury and secure new investment that provides more job security – thereby increasing its appeal to workers at other Southern plants, particularly Daimler’s operation in Alabama and BMW’s facility in South Carolina.

A deal brokered in part by a new UAW-led works council to bring to Chattanooga the new CUV, unveiled at the 2013 North American International Auto Show as the CrossBlue Concept, would go a long way toward polishing the union’s image in the South, as would constant reminders from VW of its strong, mutually beneficial working relationship with the UAW.

It’s also important to note winning the Chattanooga vote would not mark the UAW’s first foothold in the region or with a foreign transplant. It already represents Mitsubishi workers in Illinois, Detroit Three plants in Tennessee, Missouri and Kentucky and some supplier operations in the South, Dziczek points out.

Labor-Cost Gap Closed

Of course, the UAW would like to see industry wages rise. Union President Bob King, who will step aside in May, has made organizing a transplant automaker the key mission of his administration, in part to tip wage-negotiating power back in the direction of the UAW.

King’s heir apparent, Dennis Williams, has said he wants the second-tier entry wage paid at the Detroit Three plants increased so it is closer to pay earned by those with more than three years on the job, and is making that an objective of contract talks next year.

“It’s time to bridge the gap. No doubt about it,” Williams told The Detroit News last week.

But a victory by the UAW at Chattanooga mostly would be symbolic for the UAW, says Dziczek.

As the union has lost membership and its employers have ceded market share, some of the labor organization’s wage power has swung south of the Michigan border, she agrees.

Because there was the threat of the union organizing their plants, “Toyota and Honda wages and benefits were roughly comparable with (the Detroit Three),” Dziczek tells WardsAuto. “It’s only been in the last five to seven years where we’ve seen a deviation from that, where some of the international producers – even Toyota and Honda – have said we can set different wages for different regions.

“(It’s) an acknowledgement the union threat was not that strong any longer.”

But thanks in part to the 2-tier wage system in place at the Detroit Three and other concessions secured ahead of the 2009 bankruptcies, the labor-cost gap has narrowed overall across the industry and an apocalyptic battle over wages spawned by the Chattanooga vote appears unlikely.

In fact, non-union BMW and Mercedes already are shouldering the highest costs in the U.S., according to CAR data, hovering at the top end of the $54-$62 range, including benefits, also paid by Ford, General Motors, Toyota, Honda and Chrysler.

Volkswagen’s Chattanooga operation is in the bottom tier on wages, along with Hyundai and Kia, at about $40-$45 per hour. And while that certainly leaves room for some upward movement, part of that disparity is due to the Tennessee plant’s new workforce, which hasn’t accrued the type of benefits earned by workers who have been on the job for decades.

“Nobody at VW has 20 years’ seniority, so they have not built up higher wages on the wage scale,” Dziczek tells WardsAuto.

Shaiken says organizing Chattanooga wouldn’t necessarily have implications on auto industry wages or work practices elsewhere in the U.S.

“You wouldn’t have a pattern (contract with the Detroit Three),” he says. “But that’s not exactly new for the UAW. NUMMI (the former Toyota-GM joint venture in California that now is the site of Tesla production) was on its own schedule, and that was a large and important plant.”

And pay isn’t often the No.1 factor in why workers agree to organize anyway, Dziczek says.

“Dangling a carrot of a few more dollars an hour very rarely makes the case,” she says. “Workers take on this risk of organizing if they have other things, if they feel they were treated unfairly, if management is not open and predictable with the conditions of work.”

A win would have the UAW quickly beginning or stepping up organization drives at BMW, Mercedes and Nissan plants in the South, as well as suppliers serving those operations, Dziczek predicts. But even with VW workers onboard, big hurdles would remain.

The implications might not be that sweeping should the UAW fail, either, a distinct possibility given its track record in the region and the heightened political pressure being applied to workers.

A win ushers King out on a high note. But a loss probably means only a change in strategy under Williams, not the union’s final defeat, Dziczek says.

“I don’t think it’s devastating,” she says of the possibility the UAW drive could fail. “In either event, they will continue an aggressive push to organize more of the auto industry. They are sitting on a lot of money, and this is really important to the future success of the organization.”

The National Labor Relations Board is overseeing this week’s vote. The final tally is likely to be released Friday or Saturday, but it is unclear whether the results will be challenged in the courts.

Despite all the ambient noise, a cataclysmic near-term shift in the industry’s labor picture is unlikely to result, no matter which way the vote swings.

– with Drew Winter and Byron Pope

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