US Organized Labor Humiliated After Volkswagen's Tennessee Workers Vote Against Unionizing

Tyler Durden's picture

While US organized labor has been in a state of steady decline for several generations, never had it suffered as crushing a blow as it did last night, when in a 712 to 626 vote, Volkswagen's hourly workers in Chattanooga, TN, rejected joining the United Auto Workers labor union. What makes the defeat even more bitter is that a win would have marked the first time the union has been able to organize a foreign-owned auto plant in a Southern U.S. state, and would have been particularly meaningful, because the vote was set in a right-to-work state in the South, where anti-union sentiment is strong and all past UAW organizing drives at automobile plants have failed. What is most shocking, however, is that the defeat came even though the UAW had the cooperation of Volkswagen management and the aid of Germany's powerful IG Metall union, and yet it still failed to win a majority among the plants 1,550 hourly workers.  As the WSJ notes, "the defeat raises questions about the future of a union that for years has suffered from declining membership and influence, and almost certainly leaves its president, Bob King, who had vowed to organize at least one foreign auto maker by the time he retires in June, with a tarnished legacy."

Frank Fischer, the chairman and CEO of the Volkswagen plant in
Tennessee, left, and Gary Casteel, a regional director for the UAW
hold a press conference at the Chattanooga, Tenn., facility on Feb. 14. AP

"If the union can't win [in Chattanooga], it can't win anywhere," said Steve Silvia, a economics and trade professor at American University who has studied labor unions.

Under an agreement the UAW has with Volkswagen, it now must cease all organizing efforts aimed at the Chattanooga plant for at least a year.

And while the UAW could not blame the company, it still found a scapegoat: "The UAW said that "outside interference" affected the outcome of the vote. "Unfortunately, politically motivated third parties threatened the economic future of this facility and the opportunity for workers to create a successful operating model that that would grow jobs in Tennessee," Gary Casteel, the union official in charge of the VW campaign, said in a statement."

Then again, it's not as if the workers did not know what they had to lose:

The Chattanooga workers had been courted steadily for nearly two years by both the UAW and the IG Metall union, which pushed Volkswagen management to open talks with the UAW and to refrain from trying to dissuade American workers from union representation.

 

Mr. King made forging alliances with overseas unions the centerpiece of his strategy after he was elected in 2010. The union now must come up with a way to halt its decline. It once represented 1.5 million workers, but now has about 400,000, and diminished influence, as a result of years of downsizing, layoffs and cutbacks by the three Detroit auto makers General Motors Co., Ford Motor Co. F +1.06% and Chrysler Group.

So even with the stakes all too clear, the workers themselves voted against union representation: a step which many consider may be the beginning of the end for once all too powerful unions.

"The union needs new members. They have to organize the transplants or they don't have much of a future," said Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Mich.

 

The election was also extraordinary because Volkswagen choose to cooperate closely with the UAW. Volkswagen allowed UAW organizers to campaign inside the factory—a step rarely seen in this or other industries.

 

"This is like an alternate universe where everything is turned upside down," said Cliff Hammond, a labor lawyer at Nemeth Law PC in Detroit, who represents management clients but previously worked at the Service Employees International Union. "Usually, companies fight" union drives, he added.

Or maybe this time even the workers decided to give efficient labor supply and demand a chance? It certainly wouldn't be the first time when workers have realized that there is more downside than upside to joining a labor union:

The union's loss adds to a long list of defeats for organized labor in recent years. States like Wisconsin enacted laws that cut the power of public-employee unions, and other states, including Michigan, home of the UAW, adopted right-to-work laws that allow workers to opt out of union membership if they choose.

Than again, instead of political influence, the primary reason for the huge disappointment was the union's own internal strife and political bickering as it seeks to remain relevant in a divided world in which labor representation is increasingly equated to political affiliation.

More workers were persuaded to vote against the union by the UAW's past of bitter battles with management, costly labor contracts and complex work rules. "If the union comes in, we'll have a divided work force," said Cheryl Hawkins, 44, an assembly line worker with three sons. "It will ruin what we have."

 

Other UAW opponents said they dislike the union's support of politicians who back causes like abortion rights and gun control that rub against the conservative bent of Southern states like Tennessee. Still others objected to paying dues to a union from Detroit that is aligned with Volkswagen competitors like GM and Ford.

 

"I just don't trust them," said Danielle Brunner, 23, who has worked at the plant for nearly three years and makes about $20 an hour—about $5 an hour more than new hires at GM, Ford and Chrysler plants.

 

The no-UAW vote raises questions on how the union proceeds now in separate efforts to organize other foreign-owned plants in the South, and whether international cooperation can provide any additional leverage for labor unions.

 

The UAW's alliance with IG Metall was forged over the last several years by Mr. King, who traveled to Germany, Japan, Brazil and South Korea in hopes of getting unions around the world to combine forces.

No matter the long-term future of labor unions, one thing is certain: yesterday's defeat will make the UAW's role and leverage in US manufacturing even weaker, and in turn - lead to some very big question marks about the future of organized labor.

The UAW's loss in Chattanooga also seems likely to complicate contract talks it will have with the Detroit auto makers in 2015. Right now, GM, Ford and Chrysler pay veteran workers about $28 an hour, and new hires about $15 an hour, and the UAW wants to narrow that gap.

 

But without the ability to push wages higher at foreign-owned car plants, the UAW is likely to have little leverage in Detroit, said Kristin Dziczek, director of the Labor & Industry Group at the Center for Automotive Research in Ann Arbor, Mich.

 

"They have to organize at least one of the international auto makers in order to attempt to regain bargaining power with the Detroit Three," she added.

The one sure winner from last night's outcome: corporations, who will be delighted to know that they can take advantage of the ongoing US depression and pay appropriate wages in an economy filled with labor (and demand) slack, and instead of spending more on wages, hiring and capital expansion, can continue doing more of the kind of "capital allocation" that has sent the S&P to all time highs: stock buybacks.