Why Is VW Helping The UAW Unionize?

This week's mystery is why Volkswagen is helping the United Auto Workers unionize its plant in Chattanooga, Tennessee. One clue: the deputy chairman of Volkswagen's German supervisory board is Berthold Huber, chairman of the powerful German labor union IG Metall.

Unionizing the plant goes directly contrary to VW's interests. It would raise costs for vehicles, undercutting its competitiveness relative to the Big Three Detroit automakers and other foreign transplants. It would reduce flexibility. It would take union dues from VW workers in Tennessee and send proceeds to pensions for retired UAW employees in Detroit.

Nevertheless, VW filed papers on February 3 calling for a vote in just nine days, February 12, 13, and 14. What a Valentine's Day present for the UAW.

The UAW, whose membership declined from 1.5 million in 1979 to 383,000 today, also has efforts underway at Mercedes-Benz in Alabama and Nissan in Mississippi. The UAW is being advised by IG Metall, which has over 2.3 million members.

What is unusual about this election for United Auto Workers representation?

VW initiated the unionization election. Generally the request for unionizing a plant is made by a group of employees who want to be represented by a union. In this case, VW filed the petition for unionization. Employers generally do not want their workforces to be unionized because this raises costs and lowers flexibility.

The speedy election was coordinated with the National Labor Relations Board, which was unusually cooperative in approving the election petition. Although the election was only nine days away, the board immediately agreed to set up an election during a three-day period. The NLRB must organize and supervise the election, and count the ballots. How odd that on February 3 the Board had time available from February 12 to 14 to do this, a big favor for the United Auto Workers.

Former NLRB board member John N. Raudabaugh, now a law professor, told me, "I have never seen such a quick election."

Generally, when a union files a petition to unionize the workforce, the company holds meetings to inform workers of the disadvantages of union representation, such as the payment of dues, promotion on the basis of seniority rather than merit, etc. VW has initiated the election, and it is only allowing pro-union material and UAW representatives to walk the halls speaking to employees, according to news reports.

This is most unusual, to say the least, and might have something to do with the presence of IG Metall on the VW Board. In 2010, as part of an NLRB settlement, Tenet Healthcare was required to post a notice stating "We will not deny employees the use of conference rooms based on their opposition to a labor union." Just as employers are supposed to allow union advocates a chance to make their case to workers, so they are supposed to allow union opponents.

I called Steven Swirsky, the attorney representing VW listed on the unionization petition, to ask why anti-union workers were being discouraged. He told me that he was going into a meeting and would get back to me. I am still waiting for his call. I called Scott Wilson, head of communications for Volkswagen, and asked him about meetings for anti-union workers. Wilson said that the company had imposed a press blackout and that he could only send me a press release, not answer my questions.

VW's press release stated, "Our plant in Chattanooga has the opportunity to create a uniquely American Works Council, in which the company would be able to work cooperatively with our employees and ultimately their union representatives, if the employees decide they wish to be represented by a union."

So VW wants to adopt Works Councils at the Chattanooga plant, and unionization is the only way to get there. The Chattanooga plant, along with the VW plant in China, is the only VW plant without a Works Council.

According to the Election Agreement, "the UAW would delegate to the Works Council many of the functions and responsibilities ordinarily performed by unions as bargaining representative in the United States."

There is just one problem: U.S. labor law might not allow a union to delegate any of its duties to a Works Council. The Team Act, which would have allowed the formation of worker councils outside unions, was passed by the Republican-led House and Senate in 1996, but vetoed by President Clinton due to union pressure.

The AFL-CIO praised Clinton and said, "Under the guise of "cooperation," this damaging and unnecessary piece of legislation would have given management the say-so over who speaks for workers on issues such as wages, hours and other terms and conditions of employment -- an unfair infringement on employee rights."

Works Councils or not, the UAW will have to be in charge of the major decisions at Volkswagen. And that is probably just fine by IG Metall.

In November, IG Metall's incoming chief Detlef Wetzel told Reuters, "Low wages and union-free areas: That's not a business model that the IG Metall would support. If companies - from VW to ThyssenKrupp - entered these (southern U.S.) states in order to be free of unions, meaning to not acknowledge a fundamental pillar of any democracy, then we're in North Korea. That cannot be accepted."

And Bernd Osterloh, the chief of VW's Works Council in Germany, told reporters in January, "The U.S. is a case of disaster" for VW.

VW does not seem to care that its employees would be worse off joining the union. Dues for UAW members are two hours pay per month, or, for salaried workers, 1.15 percent of monthly salary. UAW leaders are considering increasing dues to the equivalent of 2.5 hours per month. The hourly pay for VW employees is about $20, so they would pay $40 a month, or $480 a year. This would help shore up the pensions of the UAW's 600,000 retirees, and pay the salaries of the union officials. VW workers are unlikely to see a raise, and would lose, not gain.

But that does not matter to the powerful IG Metall union interests in Germany (on whom Chancellor Merkel relies for support). They would rather see the Tennessee plant flounder and the new SUV built at the unionized VW plant in Mexico. To Germans, a successful non-union VW plant shows that cars can be made without unions. And that is not a message IG Metall wants to hear.

This piece originally appeared in RealClearMarkets

This piece originally appeared in RealClearMarkets