UAW rejected in organizing vote at VW plant in Tenn.

CHATTANOOGA -- Workers at Volkswagen AG's plant here voted to reject UAW representation, dealing a devastating loss to a union that saw the Tennessee factory as its best chance to gain a toehold at a foreign-owned assembly plant in the South.

Results of the vote -- 712 opposed to the UAW and 626 in favor -- were released late Friday by retired Tennessee Circuit Court Judge Sam Payne after three days of voting at the plant, where the company builds the Passat sedan.

Volkswagen said 89 percent of approximately 1,500 workers eligible to vote participated in the election.

"While we certainly would have liked a victory for workers here, we deeply respect the Volkswagen Global Group Works Council, Volkswagen management and IG Metall for doing their best to create a free and open atmosphere for workers to exercise their basic human right to form a union," UAW President Bob King said in a statement.

The National Labor Relations Board, which oversaw the voting, must still certify the results.

Volkswagen did not resist the two-year organizing drive, which made it unusually easy for the UAW to win workers' support for a vote.

Still, the election attracted widespread national attention from third-party union supporters and opponents, and they spent the past few weeks trying to sway the outcome with billboards, radio spots and other messages.

Some elected officials in Tennessee opposed to the unionization drive also worried that a UAW win would undermine the state's ability to attract future private investment and jobs. In some cases, they threatened to withhold future incentives for VW if the union was successful.

UAW leaders said they appear to have lost some of their support this week when some Republican leaders in the state suggested a union victory might hurt chances for an expansion at the plant.

"We started to see some movement when the governor made his comments [indicating the union could hurt economic development]," Dennis Williams, secretary treasurer for the UAW, said after the vote. "Then Sen. (Bob) Corker who said he was not going to get involved came back [to Chattanooga] and had a press conference. We had a feeling that something was happening."

Outraged

Williams and other UAW leaders were outraged that politicians and outside special interest groups "interfered with the basic legal right of workers to form a union.

"We're proud that these workers were brave and stood up to the tremendous pressure from outside," Williams, who directs the union's transnational program, said. "We hope this will start a larger discussion about workers' right to organize."

King told reporters after the results were released that the union will decide in the next few days whether to appeal the vote on grounds it was influenced by outside parties.

"What I hope the American public understands is that those people who attacked us were attacking labor-management cooperation. They don't believe in workers and management working together. We believe in that. And we believe the workers here will ultimately prevail," King said.

"It's never happened in this country before that a U.S. senator, a governor, a leader of the House, a leader of the Legislature here, would threaten the company with no incentives, threaten workers with a loss of product. We think that's outrageous," King added. "We'll look at all of our options in the next few days."

Some workers who voted no also cited the two-tier wage contracts at Detroit 3 factories and noted that some VW workers in Chattanooga make more than new U.S. hires at General Motors, Ford and Chrysler plants.

Other workers singled out a clause in a UAW-VW neutrality agreement signed in January as part of the organizing drive. In the event of a union win, the clause called for "maintaining and where possible enhancing the cost advantages and other competitive advantages that [VW Chattanooga] enjoys relative to its competitors in the United States and North America."

For some employees, that meant wages and benefits could be prevented from getting too high compared to other U.S. auto plants, including those operated by the unionized Detroit 3.

"The difference in the vote ... was people hunting down the information to make an intelligence decision, not just listening to your buddy," King said. "Of course, if you don't win, you review your strategy."

Long odds grow

The UAW, whose membership has dwindled from 1.5 million in 1979 to about 400,000 today, now faces even longer odds in its decades-long quest to organize workers at auto factories that foreign companies including Toyota, Honda, Nissan, Hyundai, Mercedes-Benz and BMW have opened across the South since the 1980s.

If results of the vote withstand legal challenges, the outcome also will diminish the legacy of King, who took the union's helm in 2010, a year after General Motors and Chrysler emerged from bankruptcy.

King vowed to ingrain the union with a more collaborative culture than the one that he conceded had played a role in the Detroit auto industry's decline.

A key test of that vow was the union's ability to branch out from GM, Ford and Chrysler factories -- a traditional stronghold -- and recruit workers at plants operated by foreign automakers such as VW, the world's second-largest automaker after Toyota.

In the months before the vote, King personally made inroads with labor leaders in Germany and reached an accord with top Volkswagen AG officials under which the UAW agreed to help form a "works council" at the Chattanooga factory.

The council, a collaboration between management and workers, would have been similar to ones at other VW plants worldwide.

UAW organizers on the ground here went into the election confident after securing signed union cards of support from a majority of the Chattanooga plant's workers.

But when workers cast their secret ballots, a slight majority -- 53 percent of those voting -- decided to keep the plant running as it does now, without the UAW.

Mark Mix, president of the National Right to Work Foundation, which opposed the organizing bid, claimed the union and Volkswagen's German management "colluded for over two years to stack the deck against the workers" and allow a rapid-fire election.

"If UAW union officials cannot win when the odds are so stacked in their favor, perhaps they should reevaluate the product they are selling to workers," Mix said in a statement.

After the tally was announced, a hundred or so dejected union supporters milled around the IBEW hall that had been the UAW's organizing center, consoling one another about the outcome.

Rapid expansion

The vote at VW is another stinging setback for the UAW, which was rebuffed by a 2-to-1 ratio in its last secret-ballot election at a foreign automaker's U.S. assembly plant -- Nissan's factory in Smyrna, Tenn., in 2001.

And the UAW's ongoing attempt to recruit workers at a Mercedes-Benz plant in Vance, Ala., and a Nissan factory in Canton, Miss. -- it faces management opposition at both sites -- now appears harder to achieve.

"While far from a death knell, this latest defeat suggests a turbulent future for an organization that has steadily lost membership and influence over the past four decades," said Karl Brauer, a senior analyst at Kelley Blue Book. "We may never know what impact a union would have on future Volkswagen plant operations in Chattanooga, or other foreign plants in the region, but we do know the rapid expansion of southern auto manufacturing has occurred without union representation."

Volkswagen AG started construction of the Chattanooga plant in 2008 as a cornerstone of its plan to push the VW brand into the top tier of car marques in the United States.

Since the plant opened in 2011, the productivity of the workforce and quality of the cars produced there have impressed top VW executives.

Crossover on table

Though weaker U.S. sales of the Passat in 2013 forced the company to cancel shifts, lay off 500 contract workers and dial back production from a high of 152,400 vehicles in 2012.

VW is also studying whether to build a crossover at the plant, a move that would likely boost capacity utilization.

Yet the plant has remained an outlier in VW's far-flung global network of assembly plants, nearly all of which are unionized, and nearly all of which use German-style works councils to give workers a say in key business decisions.

Some legal experts say such councils run afoul of U.S. prohibitions on company-controlled unions unless workers join a third-party union first.

Before this week's vote, VW and the UAW signed a 20-page agreement, dated Jan. 27, saying that if the majority of workers were to vote for UAW representation, the union would agree to hand over many of the functions that it usually oversees to a new works council.

"Our works councils are key to our success and productivity," Frank Fischer, CEO of the Chattanooga plant, said in a statement before the vote. "It is a business model that helped to make Volkswagen the second-largest car company in the world. 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."

Works council still a goal

By rejecting the UAW, despite VW executives' stated desire to set up a works council and their willingness to negotiate with the UAW, the workers in Chattanooga made clear how difficult it is to organize workers at automotive plants in the South.

Despite the vote, VW officials are not giving up on the idea of creating a worker-management group that would oversee some daily operations at the plant.

"Our employees have not made a decision that they are against a works council. Throughout this process, we found great enthusiasm for the idea of an American-style works council both inside and outside our plant," Fischer said in a statement. "Our goal continues to be to determine the best method for establishing a works council in accordance with the requirements of U.S. labor law to meet VW America's production needs and serve our employees' interests."

With a victory, the union would have negotiated wages and benefits for plant workers, leaving overtime rules, quality initiatives, health and safety guidelines and other daily operations to the works council.

Tennessee is one of 24 U.S. states with right-to-work laws, so a union victory would have still allowed workers to opt out of the union and avoid paying dues.

Union membership in Tennessee grew by 25 percent in 2013, the most of any state, with 31,000 new members over 2012, the U.S. Bureau of Labor Statistics says. Even so, only 6.1 percent of the state's workforce was unionized in 2013 compared with 11.3 percent nationally.

"It's unfortunate that there was some outside influence exerted onto this process," said Gary Casteel, director of the UAW's region 8, where the VW plant is located. "These workers have stated their position and we respect that, so we'll move forward from here and look forward to maybe someday in the future working with VW to establish a works council."

Mike Burton, a paint shop employee and one of the leaders of the anti-UAW movement inside the plant, said he and his co-workers want to see how a works council might be set up without involvement of an outside union -- despite assertions by VW that it wouldn't pass legal muster.

He said that whether workers voted for or against the UAW, they want worker representation in the plant's daily operations.

"We're just not willing to pay $600 a year to have most of that money go out of our community," Burton said.

"What they want and what we want are pretty much the same thing," he added. "If they're loyal to the UAW, they're going to have to go someplace else. If they just want employee representation with the management here at Volkswagen, we will come up with a solution -- and we will all benefit from it."

David Phillips contributed to this report.