What Are the True Implications for Manufacturers After the UAW Verdict at VW?

Manufacturing CEOs in the South and elsewhere heaved a sigh of relief after Volkswagen workers in Tennessee rejected United Auto Workers union representation. This isn’t the end of unionization attempts at transplants or suppliers.

“These issues are larger than any one vote.” National Association of Manufacturers’ Vice President for Human Resources Policy, Joe Trauger told Chief Executive. “Manufacturers have seen aggressive overreach from the Department of Labor, the NLRB, and even OSHA in recent years that aims to stack the deck against employers. Unfortunately, all indications are this type of government interference in labor relations will intensify in the coming years.” More than likely, the attempt to unionize will be repeated elsewhere and union opponents need to win every time, but supporters only need to win once.

Instead of a seismic shift that threatened to turn decades of presumptions upside down, the 6-percent margin by workers rejecting a union essentially maintained the status quo and may have assured that the UAW – and other unions – more or less have been permanently vanquished from the battlefield in a region that has been seeing a boom in jobs making autos and other manufactured products.

Local and national politicians may have had an effect with their warnings that heading down the union pathway at the Chattanooga plant could begin hugely eroding the labor-cost edge that the region currently enjoys over the traditional northern bastion of U.S. auto manufacture, and thus endanger jobs in Tennessee in the long run.

There was also saber-rattling over the many millions of dollars in economic incentives granted to Volkswagen by Tennessee politicians with the explicit presumption that the plant would remain a non-union shop and therefore undergird, not undermine, the state’s economically effective anti-union culture.

Also in the mix was the prospect that, despite its gesture of openness to the UAW’s efforts, Volkswagen would look less kindly on its vacant land next to the existing Chattanooga plant for siting manufacture of a new mid-sized Volkswagen SUV – which also could go in Mexico – as well as potentially other future VW and Audi models. Volkswagen intends to invest $7 billion in North American plants over the next five years and had been considering a move to Mexico; a loss of tax-incentives it was said could push the company to close up shop in the U.S. and move to the other side of the Rio Grande.

It should be remembered that VW once operated a car plant in New Stanton, PA that operated with UAW representation from 1978 to 1988. It had six strikes in the first two years and the facility limped along at 60 percent capacity for half the time it operated. VW finally closed it and took its manufacturing to Mexico.

What Volkswagen executives really wanted was to establish a German-style “works council” at the plant which, in practice in its home country, tends to be less inimical than an American style UAW-employer relationship. The union had agreed to such a structure at Chattanooga in exchange for lack of company opposition to its organization drive. But now VW should have no problem at all establishing a works council at Chattanooga.

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

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.”

Executives of the many car-making and supplier operations across the South – in Alabama, Mississippi, South Carolina, Georgia and elsewhere in Tennessee – should be able to rest easier after seeing the UAW’s defeat. Mercedes-Benz operations in Alabama were rumored to be the union’s next target in the event of a victory. But union moves or Right-to-Work laws do not determine by themselves the competitiveness of manufacturing. The significance of the no vote is that it may ultimately force unions to change their traditional stance.

“The need for skilled manufacturing talent remains critical across multiple industry supply chains, “ says Bob Ferrari of Supply Chain Management. “Securing experienced talent that incorporates the voice and collaboration of direct labor workers remains a critical need for innovative, industry leading manufacturers. Whether that voice is obtained by small work groups, Works Councils or a unionized work force should be the purview of both parties, and without the need for threats and heavy-handed tactics.”

CEOs may be interested in connecting with a dynamic group of manufacturing CEOs including Caterpillar’s Doug Oberhelman, the National Association of Manufacturers (NAM) president Jay Timmons and other experts at The Smart Manufacturing Summit II to be held in partnership with Caterpillar in Peoria,IL on May 20 & 21. This extraordinary event, which includes an exclusive tour of one of Caterpillar’s manufacturing plants, brings together the thinkers and doers who are forging American manufacturing’s comeback story. (See https://smartmanufacturingsummit.com/agenda/

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