The union debacle and Volkswagen's missteps

By Christopher A. Sawyer
The Virtual Driver

(February 24, 2014) The final score was 712 – 626, and the shouting has yet to subside. Despite the most liberal definition of “neutrality” ever used by the management of a global corporation, workers at VW’s Chattanooga, Tenn., assembly plant voted against joining the United Auto Workers union and foiled, for now, efforts at establishing a works council at the plant.

It is the only facility in the VW empire without this management-union-worker appendage.

Intent on bagging its first transplant assembly plant and using this victory as a springboard to similar success at the U.S. plants of Honda, Nissan and Toyota, the UAW made a full-court press to convince VW workers that their lives would be better under its banner.

It was aided and abetted by German corporate management that wanted union representation and the worker’s council it would bring. Once that happened, this state-of-the-art American facility would no longer be a threat to the health and well being of the cozy VW management/union empire.

Unlike many other companies in this situation, Volkswagen didn’t bring in consultants to show the downsides of union membership or threaten dire changes should the union be voted in. Also, the UAW wasn’t forced to track workers down at their homes, and convince them via “cold calls” that wearing the union label was in their best interest. They were welcomed into the plant to make their case.

From all reports, those non-workers who were opposed to unionization were not. Instead, the opposition was forced to take on the role usually played by the union, and forced to operate outside of the plant walls. An unprecedented media campaign was undertaken, with Tennessee senator Bob Corker often front-and-center as the bearer of doom and gloom. As the governor who spent the political capital necessary to get VW to build the plant in his home state in the first place, Corker wasn’t about to see his work undone by carpetbaggers from Detroit now that he was a senator.

Folks outside of both Michigan and Tennessee don’t understand the ties that exist between these two states. Both beneficiaries and victims of migrations to the other state at various times throughout their histories, the states have a close, if uneasy, relationship. And if there’s one thing that has been overlooked by most analysts in this soap opera, it is the fact that the people of Tennessee are familiar with the troubles that have dogged Detroit and Michigan over the decades. They’ve either seen them firsthand, or know extended family members who lived through them. These folks don’t want any part of the pathology that made Michigan the Midwestern Mecca of entitlement thinking, corruption and decay through the latter half of the 20th century.

If that wasn’t enough, UAW head honcho Bob King played an important role in the Chattanooga defeat. Desperate to protect the union’s lifeblood union dues, King worked to codify its more-equal-than-others status in Michigan’s constitution during the 2012 election.

Despite assurances from Governor Rick Snyder (R) that he had no interest in introducing right-to-work legislation, the King-led UAW backed a ballot proposal that would have kept Michiganders from introducing right-to-work legislation without a costly repeal of the proposed amendment. To the surprise of many, including this writer, the proposal was soundly defeated by voters. In response, Snyder signed into law the legislation that made Michigan — Michigan! — the 23rd right-to-work state. In the blink of an eye, the UAW snatched defeat from the jaws of victory.

This did not go unnoticed in Tennessee. Not only did it show that the once all-powerful UAW was weak in its home state, this episode gave Tennesseans an example of the tactics the union was willing to use in order to gain and protect power. It played into the hands of Sen. Corker, et. al. who used it as an example of the ways in which carpetbaggers would come to dominate Tennessee.

Unfortunately, this confrontation isn’t over. As part of its “neutrality” pact with the UAW, Germany gave the UAW the right to come back in one year to try and unionize the Chattanooga again. This war isn’t over, though the shouting that accompanies the vote results is more political theater than anything else.

Bernd Osterloh’s remarks are an example of the lunacy that surrounds this vote. Speaking to the Süddeutsche Zeitung, Osterloh claimed he is working with U.S. labor law experts to see if the opposition’s tactics put undue pressure on workers to reject the UAW. Though many in the state government vowed to cut incentives to the plant should it unionize, critics are focusing in on Senator Corker’s claims that VW executives told him the plant would get VW’s Passat-based SUV only if it stayed non-union. However, any idiot could see through this claim, and the workers in Chattanooga aren’t idiots.

The production version of VW's CrossBlue Concept still has no official home, though Chattanooga seems the most logical destination.

They know their plant is too large to build just the Passat, and it needs a second car line in order to be profitable. The SUV is a perfect fit, and Osterloh’s whiny denunciations of a secret-ballot vote are aimed at Germany where the union-backed VW Supervisory Board member is up for re-election. He has a lot of explaining to do. Further, his claims that the failure to unionize and create a works council, “might prevent VW from building further plants in the U.S. South,” is as empty as Sen. Corker’s claims.

A rational look at VW’s global manufacturing footprint would show that it has no need for more plants here. The U.S. Passat is larger than its European namesake, and designed solely for NAFTA consumption. As a result, VW doesn’t have to worry about paying a tariff in the countries to which it would be imported. If the Passat was a world car, VW would have added to the Puebla, Mexico, plant that builds the Jetta and Beetle, and built the car there. Automotive exports from Mexico, unlike those from the U.S., aren’t subject to tariffs. It’s a major reason Audi’s new plant is being built south of the border, not in the U.S. Like the Puebla plant, it will be a union plant with a workers council, and its products will be exported.

VW’s German management also has a lot to answer for, and not just for its actions prior to the unionization vote. VW management could have circumvented this entire drama by informing Chattanooga workers that they have more options available to them than joining the UAW. The workers could have allied themselves with another union for the purposes of representation, circumventing the Detroit-based union entirely.

Granted, this would put pressure on both the UAW and any union that chose to represent the workers. However, it also would put IG Metall, Germany’s dominant metalworker’s union, in the unenviable position of having to choose between its comrades in the UAW and an interloper that met all of the requirements necessary for the formation of a works council.

The workers in Chattanooga also have the right to form their own union with its own bylaws, rules and dues structure. This would have the same effect as joining an outside union, but keep more control in the hands of the workers. Plus, it would put pressure on both IG Metall and Volkswagen. Neither the union nor the company want that as it would put a fox in the henhouse. It would be tough to explain to workers at the remaining VW Group plants why they can’t form unions more responsive to their needs, with lower dues and barred by their charter from funneling funds to groups with which they do not agree. It would be a radical rethink of a union’s function and intent, and put immense pressure on the cozy relationship between VW and its unions. However, should nothing radically change in the coming months, expect the UAW to lose the next vote, and Chattanooga to remain union-free. It’s probably the best, and least messy answer at this point, thanks to the management of the VW Group’s actions.

There is, however, another aggrieved party, VW’s U.S. management team. If this episode (including Germany’s inability to state with confidence where the new SUV will be built) shows anything, it is that VW won’t hit its goal of selling 800,000 vehicles in the U.S. by 2018.

Despite what the German management team claims, it does not give its U.S. leadership the freedom to make the decisions necessary to succeed in this market. Which is ironic in that the whole union/works council mechanism it craves for the line workers is designed to open the lines of communication between all parties, increase cooperation, and reach the best possible decisions for both workers and company.

A similar internal mechanism for management would create the back-and-forth necessary to get the right product at the right time in the U.S., and schedule timely facelifts; two problems that are at the heart of VW’s recent sales decline. Ironically, Germany won’t extend the same courtesy to its own U.S. executive team.

The Virtual Driver