In Volkswagen Union Vote, Conservatives Declare Open Season on Free Markets

February 17, 2014

A common platitude among conservatives is that government should not interfere with free markets. Yet in last week’s vote among Volkswagen workers in Chattanooga on whether they wanted to join the United Auto Workers (UAW), Tennessee politicians and outside ideologues went to extraordinary lengths to meddle in the business of one of the world’s most successful corporations. Their meddling prevailed when the workers voted not to unionize, 712 to 626.

A governor asserted that past subsidies give him the right to interfere. A United States Senator claimed to know more than Volkswagen Chattanooga’s CEO and chairman. And a state senator called the company’s behavior “un-American” and threatened to oppose future subsidies to expand the plant if the workers unionized.

This was not some runaway clutch plant from Ohio; it is Volkswagen’s only U.S. assembly plant, producing the Passat. VW is neck-and neck with General Motors to become the #2 car producer in the world. The workers in virtually all of its other 105 plants worldwide are union members, and also have works councils, a cooperative structure that Volkswagen credits for high quality, morale and productivity.

VW clearly signaled openness to the Chattanooga workers voting to unionize, allowing UAW organizers into break rooms and publicly stating that the outcome of the vote will not affect its future decisions about where to locate new product lines. “Our strong desire is to have a works council present in Chattanooga,” said a VW executive in November.

Despite the company’s global success and clear signals that outsiders should butt out, elected officials in Tennessee couldn’t restrain themselves.

Tennessee Gov. Bill Haslam was consistently opposed to the workers unionizing. “I’ve been fairly vocal in a way that some people have said, ‘Why is it your business?’” Haslam told newspaper editors and publishers. “I think it is our business in the state of Tennessee. We have a considerable investment in that plant. The state of Tennessee put a whole lot of money in that plant,” the Chattanooga Times Free Press reported.

Just before and during the three-day vote, U.S. Senator Bob Corker made a string of remarkable statements, even dissing VW’s U.S. management. Corker was mayor of Chattanooga when the city landed the plant, has often spoken of his friendship with VW executives, and recounts that two key meetings to land the deal were held in his home. State and local subsidies to the plant totaled $554 million, the second-costliest package for a foreign-owned auto plant in U.S. history.

On Wednesday, the first day of voting, in what Reuters called a bombshell, Corker said “I’ve had conversations today and based on those am assured that should the workers vote against the UAW, Volkswagen will announce in the coming weeks that it will manufacture its new mid-size SUV here in Chattanooga.” Corker refused to name his source and his spokesman refused to say if Corker was also saying the SUV line would go to Mexico if the workers voted to unionize. (That is, Corker’s statement left open the possibility that he was told the new line is coming no matter which way the vote went.)

The same day, Corker called a Washington Post reporter. He discussed legal opinions about U.S. labor law and works councils, and claimed he doesn’t oppose work councils. Yet although the National Labor Relations Act prohibits company unions (which were rampant in the 1920s and early 1930s, as a device to subvert independent workers’ organizations), Corker said: “We’ve even told Volkswagen that, ‘why don’t you guys create your own union within the plant, if you feel like that is something that is necessary to fully implement this in a way you see fit.’”

On the second day of voting, Corker told Reuters he was “‘very certain that if the UAW is voted down,’ the automaker will announce new investment in the plant in the next couple weeks,’” and again refused to identify his source.

Volkswagen Chattanooga CEO and Chairman Frank Fischer disputed Corker’s claim: “There is no connection between our Chattanooga employees’ decision about whether to be represented by a union and the decision about where to build a new product for the U.S. market,” reported. Corker then dissed Fisher by claiming higher knowledge: “Believe me, the decisions regarding the Volkswagen expansion are not being made by anyone in management at the Chattanooga plant …Frank Fischer is having to use old talking points when he responds to press inquiries.”

Corker’s intrusive statements were a flip-flop; the previous week he had pledged silence: “During the next week and a half, while the decision is in the hands of the employees, I do not think it is appropriate for me to make additional public comment,” the Chattanooga Times Free Press quoted him saying. Corker’s animus towards the UAW is well-established; during the federal bailout of GM and Chrysler (which helped save the GM plant in Spring Hill, Tennessee that not only reopened but is now expanding), Corker demanded that UAW members take pay cuts to equal the non-union transplants.

Finally, State Senator Bo Watson, from a Chattanooga suburb, called Volkswagen’s actions “un-American” and made a thinly veiled threat to block subsidies for an SUV line expansion. “…Volkswagen has promoted a campaign that has been unfair, unbalanced and, quite frankly, un-American in the traditions of American labor campaigns,” Watson said. “Should the workers choose to be represented by the United Auto Workers, then I believe additional incentives for expansion will have a very tough time passing the Tennessee Senate.”

In calling a German corporation “un-American” without irony, Sen. Watson also overlooked the fact that the Marshall Plan installed members of Germany’s metalworkers union, IG Metall, on Volkswagen’s board of directors (10 of its 21 members are union members). Restoring works councils and union representation, which the Nazis had abolished, was meant to help prevent the return of fascism.

Collusion between employers and Southern politicians against unions is a many decades-old story. But usually it all happens behind closed doors—even in cases like this where the employer is not anti-union. At a time when states mortgage their futures to land high-impact trophy deals like an auto assembly plant, it is stunning to see elected officials publicly denounce a company’s business model just because it includes unions.

It’s also a teachable moment on how development subsidies get perverted, akin to Boeing using 22 states’ subsidies bids as a bludgeon for wage and benefit concessions against Machinists in Puget Sound several weeks ago.

As for the UAW and Volkswagen, they are clearly not giving up. In the wake of the vote, the union lauded “Volkswagen for its commitment to global human rights, to worker rights and trying to provide an atmosphere of freedom to make a decision.” Volkswagen sang harmony: “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,” the Washington Post reported. “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.”

Postscript: Washington Post business columnist Steven Pearlstein wrote eloquently on a similar theme as I was finishing this blog.

Footnote: contrary to some press accounts, there have been at least three foreign-owned U.S. automotive assembly plants whose workers have enjoyed UAW membership: Mazda’s plant in Flat Rock, Michigan; the Diamond-Star (Mitsubishi) plant in Bloomington, Illinois; and the New United Motors Manufacturing, Inc. (Toyota/GM then Toyota) in Fremont, California. As well, workers voted to join the UAW at two small Freightliner (then DaimlerChrysler) inspection facilities in North Carolina.