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Tennessee's battle over VW union vote has national implications

Nicole Goodkind
Nicole Goodkind
Daily Ticker

Watch the video above to see Yahoo Finance's Aaron Task and Rick Newman discuss the latest news in the Chattanooga Volkswagen union vote.

Autoworkers at the Chattanooga, Tennessee Volkswagen plant will vote on whether to join the United Automobile Workers Union this week, a campaign that has become a surprise political controversy in the state's fourth largest city.

Unionization efforts typically face strong opposition from employers, but in this case VW has remained neutral, with criticism coming mainly from conservative politicians and anti-union third-party groups like National Right to Work, a Koch Brothers-funded group.

At a press conference earlier this week, Tennessee State Senator Bo Watson said, "Should the workers at Volkswagen choose to be represented by the United Auto Workers, then I believe any additional incentives from the citizens of the state of Tennessee for expansion or otherwise will have a very tough time passing the Tennessee Senate," essentially threatening to withhold the $5,000 corporate credit VW receives for each worker and other incentives that are estimated to top $400 million over the next 20 years. 

Volkswagen intends to invest $7 billion in North American plants over the next five years but is now considering a move to Mexico; a loss of tax-incentives could push the company to close up shop in the U.S. and move to the other side of the Rio Grande.

If the workers at the VW plant do vote to unionize, they would adopt a German-style works council, the first of its kind in the U.S. Every VW factory worldwide, aside from the Chattanooga plant, has both union representation and a works council—making it an essential part of the VW culture.

Works councils, which are common in VW's home country of Germany, are groups elected by the entire workforce that work with management on problem-solving and contribute to company-wide decision-making. Many German companies consider them to be a key component of high-quality manufacturing businesses. If Chattanooga workers vote not to unionize, they'll be the only group of VW workers without direct say on matters such as the input on factory locations, work hours, vacation days and plant rules. 

Tennessee is a right-to-work state, which means that if Volkswagen workers do vote in the UAW, employees will still have the right to decide individually whether to join and financially support the elected union. Still, union membership has been sharply declining in most of the country--even Michigan--so a pro-union vote in Tennessee would signal a bit of a comeback for unions.

Union membership in the south falls well below the national average of 11.3% but in 2012 Tennessee had the largest percentage growth of union members in the United States.

At a news conference, Senator Bob Corker (R-Tenn) thrashed the UAW, calling it "a Detroit-based organization. They’re the largest shareholder of General Motors. The key to their survival is to come down and organize plants in the Southeast."

Unions (particularly the UAW) are often blamed for the fall of Michigan’s auto-industry in 2008 and 2009, and generous pay and benefits packages certainly played a role in Detroit's downfall. But mismanagement, corporate arrogance and poor strategic planning at General Motors, Ford and Chrysler also had a lot to do with it. And the UAW made significant concessions, agreeing to job cuts, reduced benefits and a tiered wage system in exchange for shares of the restructured companies. These still-unionized automakers are once again profitable, and the auto industry has created 223,100 new jobs since 2008, according to government figures.

“The United Auto Workers is not the way it was 10 years ago when General Motors and Chrysler went bankrupt,” says Rick Newman, Yahoo Finance columnist and author of Rebounders: How Winners Pivot from Setback to Success. “They really renegotiated everything with the unions.”

Conservative politicians and third-party groups also worry that unionization will spread across the south and discourage union-averse businesses from coming to their state.

A view commonly held by conservatives and libertarians is that unions and free markets go together like oil and water. Research shows, however, that right-to-work laws (which are largely considered anti-union) have failed to increase employment growth in 22 states that have adopted them.

Last week, Chattanooga mayor Andy Burke told The New York Times, “Chattanooga has unique assets that allow us to grow economically. The same things that brought VW here — quality of life, a productive work force, wages that compare favorably to the rest of the country — those will still exist regardless of what happens with unionization.”

Frank Fischer, chairman and chief executive of Volkswagen Chattanooga released a statement last week asking that workers be allowed to make up their own minds. “Volkswagen Group of America and the U.A.W. have agreed to this common path for the election," he said. "Volkswagen is committed to neutrality and calls upon all third parties to honor the principle of neutrality.” Perhaps the politicians should do the same thing, and trust these U.S. workers enough to make up their own mind.

Nicole Goodkind is a graduate of Cornell's school of Industrial and Labor Relations and was a research fellow at the New York ILR school.

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