Tesla case puts plant labor in spotlight

Review could affect other automakers

May 22, 2016 01:00 AM

BLOOMBERG

Tesla is retooling its Fremont, Calif., plant to build the Model 3. Construction labor practices in the auto industry face more scrutiny amid a boom in U.S. auto plant projects and expansions at foreign automakers' plants in the South, where labor researchers say weaker union representation raises the likelihood of labor standards going unchecked.

Eisenmann Corp. statement

"Any violation against the rules and regulations will lead to an immediate end of the business relationship."

Germany's Eisenmann Corp., a major paint shop system supplier to vehicle assembly plants, launched a probe last week into its supplier contracts following claims of labor abuses from an employee of one of its subcontractors at Tesla Motors' plant in Fremont, Calif.

The claims brought attention to construction labor practices in the auto industry amid a boom in U.S. auto plant projects and expansions at foreign automakers' plants in the South, where labor researchers say weaker union representation raises the likelihood of labor standards going unchecked.

Depending on the findings, Eisenmann's investigation could touch other automakers.

Since 2009, Eisenmann has installed paint shops or equipment at BMW's plant in Spartanburg, S.C., Mercedes-Benz's plant in Tusca-loosa, Ala., and Volkswagen's plant in Chattanooga, according to Eisenmann press releases. In April, the supplier announced a deal to build a complete paint shop for Volvo's plant under construction in Berkeley, S.C.

In a statement last week, Eisenmann said it was placing all supplier contracts under review, including those with subcontractors doing business in the U.S.

"Compliance with all statutory and other local requirements is an absolute precondition for all of our business relationships," Eisenmann said. "Any violation against the rules and regulations will lead to an immediate end of the business relationship."

ISM Vuzem, the Eisenmann subcontractor at the center of the controversy, also has a major auto industry presence. On its website, the Slovenian company, which specializes in factory construction and equipment installation, lists Toyota, Volkswagen, Ford, Saab and Mercedes-Benz among its clients.

The San Jose Mercury News, which brought attention to the situation in an investigative report last week, quoted a Vuzem worker who expected VW's plant in Chattanooga to be his next work assignment with the company.

A VW spokesman was unable to discuss its supplier relationships in detail but said the automaker's contracts require suppliers to comply with all federal laws. A BMW spokesman said, "BMW construction contracts contain provisions to prevent such issues as are alleged to have happened at the Tesla site."

Representatives for Volvo and Mercedes-Benz didn't provide comment.

According to a lawsuit filed by an injured worker, Gregor Lesnik, ISM Vuzem provided more than 150 Eastern European workers to Eisenmann for a construction job at Tesla's plant. The laborers worked long hours for low wages -- as little as $5 per hour -- in apparent violation of U.S. visa and labor laws, the complaint said.

Lesnik was seriously injured in May 2015 after falling through a temporary panel on the plant's roof. A safety supervisor wasn't present, and Lesnik wasn't wearing safety harnesses, nor was a safety net installed below the work area, according to his complaint.

In an unusual statement last week, Tesla said it wasn't legally responsible for Lesnik's injuries but nonetheless vowed to investigate the claims and take "action to address this individual's situation," citing a moral obligation.

"Tesla did everything correctly," the company said in the statement, posted on its website. "We hired a contractor to do a turnkey project at our factory and, as we always do in these situations, contractually obligated our contractor to comply with all laws in bringing in the resources they felt were needed to do the job."

Tesla pledged to "put in place additional oversight to ensure that our workplace rules are followed even by sub-subcontractors."

Labor experts say that added oversight can be missing from many nonunion plants, raising the risk of workplace abuses and injuries.

Art Wheaton, director of Western New York Labor and Environmental Programs for the Worker Institute at Cornell University, says unionized workplaces have safety committees setting rules for all workers, whether they are union members or not, he said.

"It certainly would have been more difficult for Tesla to hire illegal, imported workers and pay them below the minimum wage," Wheaton said.

Accidents do happen at UAW-represented plants. In December 2014, a 52-year-old contractor working at Ford's Kansas City Assembly Plant died after being crushed by a conveyer carriage weighing nearly 4 tons. U.S. Department of Labor investigators said his employer, KCI Inc., the contractor rebuilding Ford's assembly line there, failed to provide a hazard-free workplace. The Labor Department also cited Ford for not inspecting the construction.

Yet UAW officials say their contracts with the Detroit 3 have safeguards in place to enforce workplace safety rules and keep unqualified workers off the job site.

Mike Herron, bargaining chairman of UAW Local 1853, which represents workers at General Motors' assembly plant in Spring Hill, Tenn., said GM plants adhere to National Maintenance Agreements that require all construction, maintenance and renovation work be done by qualified workers, typically members of construction trade unions.

"When you're building a building, those are the periods when you're most prone to have accidents," Herron said. "We're very, very careful about safety, and the National Maintenance Agreements and the agreement we have locally for contractors that work here on site requires them to go through training ... to ensure the work is performed in a safe and satisfactory manner."

Said Herron: "We haven't seen anything like you're describing and the scenario that occurred at Tesla."