Volkswagen stirs American labour divide

Volkswagen’s first foray into America’s automotive manufacturing industry was, by all accounts, a disaster. Less than six months after the company opened a plant in Pennsylvania in 1978, workers went on strike for higher wages and the company was hit with a series of union-backed lawsuits. The factory lasted just 10 years.

It took Volkswagen more than two decades to venture back into the U.S. and, when it did, with a $1-billion assembly plant that opened in 2011, it chose Tennessee, a place where being anti-union is considered as patriotic as apple pie. The Southern U.S. has built itself into an automotive powerhouse, largely by luring major foreign automakers like Volkswagen with hefty tax breaks, cheap energy and, most important, a low-wage, staunchly anti-union workforce. No place has benefited more from that anti-union messaging than Tennessee, where the automotive industry has attracted $30 billion worth of investment and now employs close to 100,000 workers, more than any other Southern state.

All of that was thrown into turmoil this month, when the officials with the United Automobile Workers held a vote to unionize workers at Volkswagen’s plant in Chattanooga, Tenn. The narrow loss — 712 to 626 — is a devastating blow to the UAW, which had hoped the vote would mark a turning point for an organization that has struggled with declining membership and has been rebuffed by Southern manufacturing workers for decades.

Since he took over the helm of the UAW in 2010, Bob King has set his sights on the Southern auto industry as a fertile new battleground in the fight to save the American labour movement. But the renewed focus on the South comes at an unusual moment in U.S. manufacturing history, as recession-weary Northern states such as Michigan and Indiana adopt Southern-style anti-union legislation, known as right-to-work laws, in hopes of rebuilding their industrial base.

The Volkswagen vote wasn’t the first union drive at a foreign automaker south of the Mason-Dixon line. It was, however, according to labour analysts, the most organized and promising campaign ever waged in the South. In an unusual twist, the union also had the backing of Volkswagen’s board of directors, which is required to have strong worker representation under German corporate law.

The campaign sparked a fierce outcry among Republican politicians in the state, worried it was the start of a slippery slope to mass unionization. Sen. Bob Corker, who was mayor of Chattanooga at the time the city was looking to lure Volkswagen, warned that state officials would likely cut off the flow of hundreds of millions of dollars worth of tax breaks and subsidies to the company if its workers joined the UAW. The economic damage wrought by the union drive, he said, “would last for generations to come.” Americans for Tax Reform, the lobby group run by anti-tax advocate Grover Norquist, rented more than a dozen billboards around Chattanooga papered with slogans like, “Auto unions ate Detroit. Next meal: Chattanooga” and “The UAW Wants Your Guns.”

“People act as though this is Attila the Hun coming over the hill,” says William Canak, a labour relations expert at Middle Tennessee State University. “The opposition is quite strong, because one crack in the dam would encourage people [to unionize], and perhaps not only in the automobile industry.”

Workers in Tennessee have long resisted the call of unions over fears they would scare away jobs, not to mention Republican voters’ resentment that unions are powerful financial backers of the Democrats.

The housing meltdown and the protracted recession that followed left many workers thankful just to have jobs. But, five years after the financial crisis, Tennessee’s economy is now booming. Employment in the state’s automotive industry has been among the fastest-growing in the country since the recession, according to a recent study by the Brookings Institution. Wages for full-time workers at the Volkswagen plant are comparatively high, averaging around $20 an hour. Still, many of the new jobs in Tennessee’s auto factories have been low-wage, temporary, contract positions, the study found. The average manufacturing worker in the state earns just $9.10 an hour. Analysts say economic recovery, coupled with the explosion of temporary contract work and broad concerns over income inequality, has emboldened workers in the state to start demanding better treatment from employers. “The emergence from the recession has been pretty good in Tennessee,” says Daniel Cornfield, labour sociologist at Vanderbilt University in Nashville. “So, in periods of economic growth and inequality, unions usually do pretty well.”

The state recorded the fastest unionization rate in the country last year, though that was largely thanks to employment growth at previously unionized plants, including a UAW-organized General Motors plant in Spring Hill. Unions have also have scored small victories in other Southern states. In recent years, the UAW has managed to unionize automotive parts suppliers in Alabama and Kentucky. Business officials, secure in the thought that their workforce was inherently opposed to unions, have suffered some nasty surprises. “Employers know and treat their workers well, so there’s no need to unionize,” the head of the Georgia Chamber of Commerce confidently told an Atlanta newspaper last year, shortly before 500 food service workers at Atlanta’s airport, the world’s busiest, opted to unionize.

But while union votes are typically grassroots efforts, driven by workers angry about wages and working conditions, in Volkswagen’s case the union drive was, unusually, a top-down affair that represented a coordinated international effort between the UAW and Germany’s powerful auto union.

Under German law, large corporations must have a two-tiered board structure, one half of which is a supervisory board split evenly between executives and employee representatives. It has the power to hire senior managers and determine major business decisions. Worker representatives on the board threatened to block new investment at the Chattanooga plant unless the UAW was allowed to organize. “Volkswagen’s image as a socially concerned company is on the line,” says Michael Fichter, a labour relations expert at the Free University of Berlin. “The workers’ representatives have said you’ve got to uphold this position, even in the United States, because the company’s reputation is based on the fact we have a culture in which we co-operate.”

It wasn’t a threat the company was prepared to take lightly. Volkswagen has struggled to gain a foothold in the U.S., where sales of its vehicles fell 19 per cent last month. Central to its growth strategy is launching a new crossover SUV by 2016, which the company plans to build in Chattanooga. “The U.S. is one of those linchpin markets they want to catapult them to become the No. 1 automaker globally,” says Mike Wall, an auto analyst with IHS. “Bringing out new products is super-critical right now.”

But aside from highlighting the culture clash between German automakers and their operations in the U.S. South, observers say the Volkswagen experience has opened up a critical new “German-style” model for how American unions approach traditionally anti-union states. Large German companies organize “works councils,” plant-level boards made up of both management and blue-collar employees who decide many of the plant-specific issues normally done through collective bargaining, such as shift schedules. It was the push from German auto unions to establish such a “works council” in Chattanooga that initially encouraged the UAW to try to run a full-scale union drive at the plant. As part of its Volkswagen campaign, however, the UAW agreed to give up some traditional responsibilities for settling shop-floor issues to the works council, a body that would be open to both union and non-union employees. Fichter says such a model could be used to win over skeptical employees at other German plants in the South that are the focus of UAW union efforts, including a Mercedes-Benz factory in Tuscaloosa, Ala., and a BMW plant in Spartanburg, S.C.

Despite the failed vote, both the UAW and Volkswagen’s union representatives, have also signaled they’re not giving up the fight at Chattanooga. Bernd Osterloh, head of the German automaker’s global works council, was planning fly to Chattanooga to find alternate way of creating a works council at the plant. He told a German newspaper that union representatives on the company’s board would block the construction of any new plant in the South unless Chattanooga employees organized. (It’s likely an empty threat, since auto analysts say there’s little chance of Volkswagen building a new plant anywhere in the U.S. anytime soon and Osterloh avoided saying whether union officials would follow through with their earlier threat to block expansion at the Chattanooga plant.)

This week, the UAW announced it was appealing the results of the union vote to the National Labor Relations Board, alleging excessive “outside interference.”

But just as the American unions are adding new tools to their arsenal, anti-union activists have promised to double-down on the fight to protect Southern manufacturing from organized labour. “I don’t see the anti-union forces that have come out in such full force in Chattanooga just laying down their arms after this,” says Fichter. “They’ll be out there in Tuscaloosa and Spartanburg and wherever the UAW comes up.” If anything, the Battle for Dixie has just begun.