Volkswagen

VW offers UAW union a bit of hope

September 17, 2013: 5:00 AM ET

VW management is showing remarkable openness on the subject of unionization. Now it's up to the UAW to show that it's worth consideration.

By Doron Levin

VW's Chattanooga, Tennessee factory

VW's Chattanooga, Tennessee factory

FORTUNE -- The United Auto Workers union has been hobbled by its utter failure to organize automotive assembly plants in the southern U.S. Now it appears the UAW has a slim chance to regain a bit of lost ground at Volkswagen's factory in Chattanooga, Tennesee.

VW management is showing remarkable openness on the subject of unionization, thanks to top VW executives in Germany who favor giving labor a voice in the U.S. along the lines of the German system of a "works council" that advises factory management. Privately, many U.S.-based VW executives are horrified.

Resolving this divergence in management opinion is critical for VW, which is on a push to become the No. 1 automaker worldwide. To achieve its goal, the German automaker must achieve meaningful sales increases in the U.S. market, where it has been little more than a niche player. Without robust local production, VW would have to rely on vehicles imported to the U.S., which would be more costly.

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The UAW said it has collected signed cards from more than half of VW's workforce in Tennessee, indicating interest in a union. UAW President Bob King has expressed optimism that VW will recognize the UAW, which would allow the union to circumvent an election among VW workers in Chattanooga. Workers at Nissan's factory in Smyrna, Tennessee have twiced rejected UAW membership when put to a vote, by large margins.

"An election process is more divisive," King recently told Reuters. "I don't think that's in Volkswagen's best interests. I don't think that's in the best interests of Tennessee."

The signed cards are only an expression of interest in learning more about the union; they don't mean that a majority of workers would vote in favor of putting together one.

Republican Sen. Bob Corker as well as Gov. Bill Haslam have come out in opposition to a union at the VW plant, though some pro-union Democrats in the state are in favor.

South Korean, German, and Japanese automakers have expanded their footprint in the U.S. by locating most of their final assembly factories in the South, where unions are weak. Starting pay for new hires in UAW final assembly plants in the North has fallen to roughly the level of the foreign transplants. But U.S. management teams prefer to avoid cumbersome work rules and pay scales dictated by union contracts.

For the UAW, halting its multi-decade slide in membership and political clout with victory in Tennessee is crucial, much more than adding three or four thousand more members to its rolls.

But first the union must prove to VW workers – and to company management – that it offers tangible value in return for monthly dues and the possibility of labor unrest and work stoppages. That will be difficult: Unions represent fewer and fewer workers in the private sector precisely because they don't serve a self-evident purpose – as they did during the 1930s.

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VW enjoys an extremely cozy relationship with the metalworkers union in Germany, one that bears little resemblance to the rancor that has marked the UAW's history with Detroit-based automakers.

Bob King would do well to consider whether he is making a strong case for his union to VW workers, as opposed to fellow metalworkers and sympathetic VW executives back in Germany. And VW management should consider carefully whether a pact with the UAW will bring it closer to its goal of being a strong player in the world's most valuable car market.

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