A Volkswagen is seen in the worker car parking zone at the Volkswagen Automobile Assembly Plant on March 20, 2024 in Chattanooga, Tennessee.
Elijah Newledge | Getty Images
DETROIT – The United Auto Workers scored an enormous win this weekend.
Volkswagen Workers in Chattanooga, Tennessee, voted late Friday to affix the UAW – the first victory for a Detroit union at a foreign-owned automaker plant in the South. The vote could have far-reaching effects on other automakers, organized labor and the overall U.S. automotive industry.
“This is a really profound victory for the UAW and the labor movement in general,” said Alex Hertel Fernandez, a former Labor Department official and professor of international and public affairs at Columbia University. “This is also a really decisive victory.”
Union organizing passed with 73 percent of the vote, or 2,628 employees, in support of the UAW, in line with the National Labor Relations Board, which monitored voting Wednesday through Friday.
The German automaker and the union, barring any challenge to the vote, are expected to maneuver forward with contract negotiations for about 4,300 employees subject to the vote. The NLRB still needs to substantiate the findings.
Here’s what investors should know about the vote and the UAW’s next steps:
UAW speed
The UAW saw Friday’s vote as the union’s best shot at organizing the VW plant after strikes and record contracts. General Motors, Ford Motor And Chrysler’s parents Stellar In 2023
The union, led by President Sean Fein, is using deals with Detroit automakers, including record wage increases and advantages, as a springboard for an unprecedented organizing drive by 13 non-union automakers in the U.S. On.
In addition to Volkswagen, the union is targeting: BMW, Honda, Hyundai, Lucid, Mazda, Mercedes-Benz, Nissan, Rivian, Subaru, Tesla, Toyota and Volvo. About 150,000 U.S. auto employees are involved in the drive, in line with the UAW.
“It’s likely to be contagious,” Hertel-Fernandez said. “Where workers see success in organizing or striking, it inspires more action in the industry and beyond.”
Kelcey Smith displays a UAW button on April 10, 2024 in Chattanooga, Tennessee.
Kevin Worm | The Washington Post Getty Images
Then there are 5,200 Mercedes-Benz employees unionized at an SUV plant in Vance, Alabama. Earlier this month, employees at the facility filed NLRB papers for a proper election scheduled for May 13 through May 17.
“We’re going to take this fight to Mercedes and everywhere,” Fehn told VW employees Friday night after the historic vote. “So, thank you all, thank you all, for your fight, for your work. And let’s get to it. Let’s get to work. And let’s win more for the working class of the entire nation. “
Impact on labor costs
Labor costs are at the top of the list of potential impacts from streamlining efforts at VW.
UAW organizers used record contracts with Detroit automakers to realize support for the union in Chattanooga. VW’s operating margins in the U.S. are relatively low, and “substantial wage increases could weaken the profitability outlook for local U.S. operations,” UBS said in an investor note.
But for the Big Three Detroit automakers — and their shareholders — the VW organizing drive may very well be a positive one.
GM, Ford and Stellantis all have higher labor costs than unorganized automakers like VW. Depending on the details of the deal, a labor push like VW and others could even level the playing field.
United Auto Workers President Sean Fein cheers U.S. President Joe Biden during his State of the Union address to a joint session of Congress in the House Chamber of the U.S. Capitol on March 7, 2024 in Washington.
Evelyn Hockstein | Reuters
“Overall, given the substantial wage gap between UAW-unionized workers (Detroit-3) and non-unionized workers in southern states, it can be assumed that the vote will further pressure VW wages over time. will cause,” UBS said in an investor note.
Before last yr’s contracts with the Detroit automakers, labor costs for Ford, GM and Stellenbosch were all between $63 and $67 an hour, in line with industry experts. That compares with foreign, or transplant employees, reminiscent of VW at $55 an hour. These costs included all advantages and health care costs.
Still, there is not any guarantee that VW — a much smaller automaker in the U.S. — will conform to the same terms as traditional domestic automakers.
“The real fight starts now,” Fein said Friday, referring to the expected negotiations between the union and VW.
Union jobs
The VW vote was widely expected amongst the UAW’s organizing plans, as the union had already established a presence there after votes that failed in 2019 and 2014.
The margin of victory in Chattanooga could bode well for UAW efforts at other automakers, in line with Sharon Block, a professor Harvard Law School and former DOL and NLRB officials.
“I think it’s really hard to overstate the importance of this moment and how strategic the UAW has been in this campaign, which I think shows that this is not the last time we see a UAW victory. going to talk about at an auto plant in the South,” Block said.
Although opposition to the VW vote was rare, the most notable example came the day before the election, in the form of a letter from six Republican governors urging the UAW to organize auto factories in the South. Condemned and warned of possible dismissal.
“We have worked tirelessly on behalf of our constituents to bring good-paying jobs to our states. These jobs have turn out to be a part of the fabric of the automotive manufacturing industry. Unionization will surely put jobs in our states at risk. “In fact, this year already, all UAW automakers have announced layoffs,” read the statement, which was signed by the governors of Alabama, Georgia, Mississippi, South Carolina, Tennessee and Texas.
Block called the letter an “empty threat” and a “joke” but noted that rising labor costs could end in fewer jobs.
Fewer jobs in the US automotive industry also mean fewer employees eligible for union membership.
UAW membership amongst Detroit automakers has declined significantly in recent many years, as free trade agreements have allowed automakers to provide cheaper vehicles elsewhere.
UAW membership, composed mostly of autoworkers but in addition including agricultural and aerospace employees, reached 1.5 million in 1979. As of last yr, union membership was 370,239 employees – down 3.3 percent from 2022 and 75 percent below its peak. Detroit automakers employed about 150,000 of the 2023 total.
– of CNBC Michael Bloom Contributed to this report.
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