Thursday, Oct 23, 2014

The demise of auto manufacturing in the U.S. South


Published:   |   Updated: August 18, 2013 at 10:11 PM

A little noticed story was recently reported about Bernd Osterloh, global chairman of the Group and General Works Council of Volkswagen, Germany, trying to get a foothold into Volkswagen, Chattanooga, Tenn., which could pave the way for the United Auto Workers UAW.

A little background: German industrial relations are characterized by a dual structure of both trade unions and works councils. As to the latter, works councils have been constitutionally enshrined in Germany since the 1920s. They are elected by the employees and have a seat on the board of directors, where they advise the company about worker's issues, such as pay, benefits, work rules, working conditions and even the work product itself.

This is pretty heady stuff, but the chairman of the board, elected by the shareholders, gets to break any ties. In Germany a company can have a workers council yet not be unionized. They cannot call for strikes. This is a creation of European labor and is used to facilitate agreements made at the national level by unions and employer associations.

Volkswagen's U.S. plant is their only facility that does not have a works council, so the company is quite familiar with the concept. The United Auto Workers is well aware of this and have consulted with Volkswagen's union leadership in Germany, and probably Osterloh, to develop a strategy to get a presence in Volkswagen with something modeled after a German works council. It would have to be creative since U.S. labor laws theoretically will only permit them if the plant has been unionized and the union recognized as their bargaining agent for their employees.

Since corporate cultural history at VW is German, their experience with unions is more collaborative - more of a partnership - whereas in the U.S., union and company relationships are highlighted by antagonism and belligerence - including even public sector unions, which theoretically work for the taxpayers. So that might account for the company taking a neutral position on union representation, by saying it's their employees' right to choose whether or not they want to be represented by a union. (That's simply a restatement of the law.)

Volkswagen's origin was in Germany, a country that has embraced co-determination - not conflict - between labor and management. As a result, their reputation for quality manufacturing is legendary. As late as 2009, with a population of only 82 million, it was the world's top exporter. Exports of manufactured products account for 40 percent of the German economy. (U.S. exports account for only 12 percent and that includes services.)

It is known as "the workshop of the world." Work councils are a part of the reason for its success. In the U.S. the UAW's goal was to bring a company to it knees.

They are common in Europe. In fact, the European Union passed a directive setting up The European Works Council ostensibly to assist companies that operate across the EU.

The UAW has been obsessed with organizing foreign-owned plants in the south with its right-to-work states, which are attracting all sorts of capital investment. Their membership has declined from 1.5 million to 380,000 today. They have to do something, so they are sweet-talking VW into believing they have changed their mission statement to embrace more of a collegial partnership with industry, rather than an adversarial one. How naive can a company be?

Recall the collegial Andy Stern, union head and President Barack Obama's close friend, who famously said, "We like to say we use the power of persuasion first; if it doesn't work we try the persuasion of power."

VW workers believe their company is union-friendly - given their German roots - so if the UAW is viewed as pushing for the works council idea, it will bolster their image as the good guy to the plant workers and set up a more favorable atmosphere for a union vote in the future.

Local Republican politicians have expressed concern, so Osterloh said he'd be more than happy to talk to them to allay their fears. The governor is worried because out-of-state companies that are considering relocation to Tennessee are worried and may elect to go to other southern states. (The Economist reports that "Seven of America's 15 most productive assembly plants last year were foreign-owned." Guess where they are located?) The Times Free Press in Chattanooga reports that the local chamber of commerce "believes that if the UAW established a stronghold in Chattanooga, it would be a negative." What an understatement.

The National Labor Relations Board now has a quorum, as the Senate just confirmed all five of President Obama's picks to the board. It will undoubtedly take a liberal approach to the interpretation of labor law.

VW has said they "are working on an innovative model for the representation of employees interests . based on positive experience in Germany." They'd better be careful. The NLRB could circumvent the law - which Obama and his inner circle of power regularly do - to allow an employee-elected council without a union vote.

Talk about the camel getting his nose under the tent - and the evocative saga of the bailouts and bankruptcies of Detroit's GM and Chrysler.

John Reiniers is a retired attorney who is a regular columnist and lives in Spring Hill.

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