CrossBlue in Crosshairs as VW-UAW Clash Escalates

Volkswagen quietly lets the news slip out that its Chattanooga, TN, plant finally has begun assembling prototypes of the new bodies for its new CrossBlue CUV due out next year.

But, already beleaguered by the Dieselgate scandal, product missteps and disenchantment among its dealers, Volkswagen’s ambitious plans to rebuild its presence in the U.S. have collided with a labor dispute hanging over the new, billion-dollar assembly plant and challenges the automaker’s culture of labor cooperation.

Over, the years a half-dozen other companies have set up non-union plants in the Southeast U.S. while holding the UAW at bay with a variety of tactics, ranging from comparable pay to threats to move work to Mexico or Thailand.

Volkswagen’s Chattanooga plant, however, is the site of the first successful organizing drive by the UAW at a light-vehicle plant operated solely by a global automaker in the U.S. But VW, even without having totaled up the cost of the emissions scandal, is waging an expensive legal battle to deny its skilled-maintenance workers a collective-bargaining agreement.

Volkswagen has offered to meet with the UAW on the automaker’s home turf in Germany to try and iron out their differences. But VW’s human-resources managers maintain they want a single bargaining unit to represent all 1,300-plus hourly workers at Chattanooga.

However, experts note the UAW may have gained the upper hand, leaving Volkswagen in a precarious position.

In a December 2015 election supervised by the National Labor Relations Board, electricians, millwrights and mechanics voted by a 71% margin to join the UAW. The NLRB says of the 164 skilled-trades workers eligible to vote at Chattanooga, which employs a total of 1,450 workers, 104 voted to join Local 42 and 48 voted no.

U.S. law allows employees at one company to belong to multiple bargaining units or unions, according to Art Wheaton, a Cornell University expert on labor relations.

“VW has little or no chance in their efforts to fight the skilled-trades UAW local. It was not even a close vote. More than 70% voted in favor and the legacy of skilled-trades locals in the U.S. is well-established. VW lost in the NLRB (ruling) and likely (will) continue to lose in their future court cases,” Wheaton tells WardsAuto in an e-mail.

UAW Has Powerful Ally in German Union

Harley Shaiken, a labor expert from the University of California-Berkeley, says he believes the union is determined to maintain and expand its position in Chattanooga. “The UAW also has a powerful ally in IG Metall,” the union representing VW hourly employees in Germany, he says.

IG Metall helped the UAW organize VW’s first U.S. plant in the 1970s by strongly suggesting the automaker’s management bargain with the union. However, VW’s experience at the plant in Westmoreland, PA, was marked by labor strife, poor sales and ultimately a sharp drop in utilization brought on by intense competition from Japanese automakers.

VW opted for what amounted to an import-only strategy even as Honda, Nissan and Toyota were opening new plants in the U.S. and closed the Westmoreland plant in 1988. The UAW offered to make concessions to keep the factory open, but VW dismantled the assembly line and shipped it to China. UAW officials warned the German automaker at the time it was making a mistake by abandoning the Westmoreland plant and, by extension, the U.S. market.

Twenty years later, intending to make Volkswagen the world’s largest automaker, VW management elected to build a new plant in Chattanooga despite the fierce recession that had sharply reduced vehicle sales in the U.S.

The UAW has emphasized throughout its campaign in Chattanooga it would like to build a cooperative relationship with Volkswagen of America that would benefit both the company and its employees by giving workers a more direct voice in the plant’s day-to-day operations as well as a negotiated compensation package.

Volkswagen’s response to the UAW overtures over the years can be described as ambiguous or inconsistent.

When the automaker announced plans for the Chattanooga plant in 2008, the prospects of unionized workforce seemed remote, as the UAW was preoccupied with Detroit automakers’ pleas for a federal bailout that ultimately led to sweeping changes in the union’s contracts with General Motors, Chrysler and even Ford, which did not seek federal assistance.

While it has made overtures to the UAW and maintains it has a policy of neutrality that will let employees decide their form of representation, VW management in Chattanooga has brought in a law firm with a reputation for union-busting, Littler Mendelson, to appeal the outcome of the NLRB certification of the skilled-trade workers’ vote to join the UAW.

“We provide legal advice to companies as they devise and implement strategies for lawful union avoidance and for dealing with conventional organizing campaigns and unconventional corporate campaign tactics,” Littler Mendelson states on its website.

"What Is the Real VW?"

Shaiken says the Littler Mendelson hiring appears to fly in the face of the corporate values Volkswagen has professed to uphold over the past seven decades.

“This is a major question,” he says. “This is a company that has built its identity on…cooperation with unions around the world. For them to hire a law firm (to try to quash the Chattanooga election results) is to raise the question of, ʽWhat is the real VW?’”

The union is sharpening its attack on Volkswagen management in response to Littler Mendelson’s joining the fray.

“If Volkswagen tries to force this matter into the federal court of appeals, we see it as a stall tactic that won’t work,” says Gary Casteel, the UAW’s secretary-treasurer who has spearheaded the campaign to uphold the skilled-trades workers’ vote.

“We reject the company’s claim that recognizing and bargaining with the skilled-trades employees would somehow splinter the workforce in Chattanooga. Recognizing clearly identifiable employee units is common in the U.S. Furthermore, Volkswagen plants all over the world – including in countries such as Italy, Russia and Spain – recognize multiple unions that represent portions of a workforce.

“At a time when Volkswagen already has run afoul of the federal and state governments in the emissions-cheating scandal, we’re disappointed that the company now is choosing to thumb its nose at the federal government over U.S. labor law. At the end of the day, the employees are the ones being cheated by Volkswagen’s actions,” Casteel says.

Volkswagen spokesman Scott Neal Wilson in an-email declines to say whether Littler Mendelson will handle the next step in appealing an NLRB panel’s 2-1 vote upholding the skilled-trades workers’ vote to join the union.

Dispute Predates Chattanooga Plant Itself

The dispute dates back to 2008, when VW Volkswagen hired Don Jackson away from Toyota, where he was manager of the Japanese automaker’s truck plant near San Antonio, to manage the Chattanooga plant and oversee the construction and launch of the new factory.

A veteran manager thoroughly schooled in the Toyota production system, Jackson had no use for the UAW and said so publicly. But, Shaiken notes, Jackson’s position eventually was at odds with senior VW management in Wolfsburg.

“Unions have a very powerful position on the Volkswagen supervisory board,” Shaiken says.

By 2011, car sales had recovered and the UAW, with help from the German labor unions, prepared to launch an organizing drive at the newly opened Chattanooga plant.

Then-UAW President Bob King had worked diligently to enlist the help of IG Metall, which represents dozens of companies across Germany in addition to VW and is considered one of Europe’s most influential unions. IG Metall also has a major voice on VW’s global works council, which includes union representatives from throughout the automaker’s manufacturing empire and guides its labor policy.

The UAW campaign stressed that union representatives deal directly with management at every other VW plant in world. The UAW effort in 2013 was aided by VW’s faltering plans for growth in the U.S., but one consequence that unsettled union organizers was the layoff of 500 workers at the Chattanooga plant, most of them temporary.

The UAW finally felt confident enough to ask for an NLRB-supervised election, which was slated for February 2014.  But the campaign stalled as conservatives and anti-union groups, alarmed by VW’s apparent willingness under pressure from Europe to open the factory doors to UAW organizers, rushed to prevent organized labor from establishing a beachhead in the non-union Southern auto sector.

Republicans in the Tennessee Legislature threatened to withhold incentives they had offered VW and U.S. Sen. Robert Corker (R-Tenn.), who had nearly derailed the GM-Chrysler bailout over the UAW’s role in it, warned the Chattanooga plan would close if workers voted to join the union.

All of the plant’s hourly workers participated in that election, which resulted in a 712-626 vote against UAW representation. But instead of fading away as it had done after losing a 2001 vote at Nissan’s plant in Tennessee, it did not retreat.

Union Down But Not Out

Maintaining the pro-union faction at Chattanooga was too large to ignore, it took the unique step of creating a local union for them even though it had neither a collective-bargaining agreement with the automaker nor dues-paying members.

Jackson, who left VW in 2012 as the organizing drive gained momentum, had recruited staff who shared his anti-union attitude, according to Shaiken, and they were appalled when the orders came down from Wolfsburg to let the union attempt to organize the plant.

“They didn’t speak directly (to hourly workers) against the UAW. It was more subtle than that. But they had ways of influencing people…something deep-seated worked to undermine the union,” Shaiken says.

Facing ongoing pressure from the UAW and IG Metall, which continued to insist management at Chattanooga abide by VW’s corporate labor policies and practices that require employee representation, the automaker took a new tack. It offered to recognize, on a limited basis, any group that could prove it represented a sizable number of employees.

UAW Local 42 promptly produced signed cards indicating 55% of workers supported the union. However, Volkswagen also agreed to recognize an anti-UAW group of employees that drew its support from various groups long opposed to organized labor.

Volkswagen also declined to enter into collective bargaining with Local 42.

After the formation of the anti-UAW workers group, the union advanced a new strategy focused on members of the critical skilled-trades cadre, which has extensive training and would be hard to replace.

The union also wanted to have a bargaining unit in place before VW began recruiting new employees to build the CrossBlue CUV, which the automaker is counting on to help reverse its sharp decline in the U.S. market.

Shaiken says he suspects some top anti-union VW managers are using Dieselgate to push back against the UAW and IG Metall. Indeed, a new report from BMI Research notes the automaker is under heavy pressure to trim costs and boost efficiency in the wake of the emissions scandal.

But he predicts IG Metall won’t be distracted by Dieselgate and will continue pressing to unionize Chattanooga workers.

“The reality is, our UAW local union already represents a majority of the blue-collar workforce in Chattanooga,” the UAW’s Casteel says. “Volkswagen knows this because the company has verified our substantial membership level.

“If Volkswagen wants meaningful employee representation, the company is free to recognize the local union as the representative of its members, as it committed to do previously. It is unacceptable that the Chattanooga plant is the only facility not represented on the Volkswagen Global Group Works Council.”