Tennessee’s Anti-Union Approach May Stall Plans to Expand VW Plant

Maker might look for other options to build CrossBlue model.

by on Apr.08, 2014

The CrossBlue Concept was slated to be produced at the company's plant in Tennessee, but the efforts by state and national lawmakers to chase off the UAW, may have cost the plant the vehicle.

The state’s political leaders did everything they could to keep the union out of Volkswagen’s big assembly plant in Chattanooga, Tenn., but they may also have short-circuited plans by the automaker to expand that factory to add production of a major new crossover-utility vehicle.

Barely two months after workers at the VW factory narrowly voted against the United Auto Workers Union, plans for the new Volkswagen CrossBlue model appear to have ground to a halt, in part due to delays over proposed state incentives meant to offset the cost of that factory expansion.

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And with the Tennessee legislature set to soon adjourn for the year, VW may be left with no option but to consider alternative production plans, several sources cautioned. They note that the automaker has become increasingly wary of working with Tennessee in the wake of the union flap – several top state leaders directly criticizing the company for inviting the UAW vote.

In fact, several of the state’s Republican leaders recently acknowledged they had attempted to tie future incentives for VW to the outcome of a union drive.

Volkswagen opened the Chattanooga plant in mid-2011 to produce the latest-generation Passat model.  Sales initially kept the factory running at full speed, but demand has begun to weaken and the German maker has been pressing to expand the factory’s flexibility. Key to that strategy would be the addition of the new CrossBlue, a production model based on a popular VW concept crossover.

VW originally hoped to make a decision on adding the CrossBlue to its line-up by mid-2013 but repeatedly delayed the process, apparently in part due to concerns about what would happen in Chattanooga. The maker unexpectedly announced its interest in forming a German-style “works council” that would have required it to accept a union at the facility.

That came as a breakthrough for the UAW, which has long struggled to organize the growing number of foreign-owned “transplant” assembly lines.  But it also generated a virulent backlash in Tennessee, a state that has traditionally embraced a right-to-work business model, in line with its other major automotive employers, such as Nissan.

U.S. Senator Bob Corker was among a number of leaders who actively opposed the union, issuing dire warnings to VW employees about the possible consequences of the organizing drive. The maker itself came under fire from some state officials who went as far as warning that incentives for VW could be put in jeopardy if the UAW were to win.

Despite the union loss, Governor Bill Haslam has said that efforts to negotiate new incentives have stalled – though he blames Volkswagen for the delay.

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Beyond the finger-pointing, insiders say the maker has clearly felt burned by the negative comments and warnings aimed in its direction. The question is whether it would be willing to make a move in Tennessee’s favor if the proposed aid package were dropped or delayed.

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Since the CrossBlue is expected to be focused on the U.S. market, VW would prefer not to import the vehicle from Europe. But it does have other options, possibly including an expansion of its plant in Mexico.

Meanwhile, the February unionization vote remains in dispute. The UAW has challenged the results with the National Labor Relations Board, and VW itself has criticized the involvement of Sen. Corker and other Tennessee officials. But several Chattanooga employees have, with the financial assistance of right-to-work groups, filed their own appeal in favor of the vote outcome.

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There is no word on if or when the NLRB might step in to either challenge or validate the union vote results.

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One Response to “Tennessee’s Anti-Union Approach May Stall Plans to Expand VW Plant”

  1. Jorge M. says:

    As ye sow…

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