In April 2024, an overwhelming majority of workers at Volkswagen's Chattanooga, Tennessee plant voted to allow the United Auto Workers (UAW) to represent the nearly 4,300 workers there.
The victory was significant for the UAW, as the Volkswagen (VLKAF) plant became the first foreign-owned automotive plant in the American South to unionize after two failed attempts in 2014 and 2019.
Organizers and union supporters sought to unionize the plant in response to the UAW's contract victories with Detroit's Big Three in November 2023, noting that a contract negotiated with the union could result in better pay, working conditions, and job security.
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“This election is big,” said Volkswagen paint department worker Kelcey Smith. “People in high places told us good things can’t happen here in Chattanooga. They told us this isn’t the time to stand up, this isn’t the place. But we did stand up, and we won. This is the time; this is the place. Southern workers are ready to stand up and win a better life.”
Five months later, the time has come for VW and the UAW to come to the bargaining table; however, there may be more at stake for the German automaker.
The UAW is negotiating with Volkswagen
On September 15, UAW leadership held what it called a bargaining kickoff rally, where newly unionized VW workers showed their fierce support and determination to secure a fair contract.
In his speech, UAW President Shawn Fain laid out the union's priority demands for Volkswagen: higher wages, profit sharing, cost-of-living adjustments, retirement security, affordable healthcare, and eliminating tiered wages.
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He justified the demands during pre-negotiations by noting that VW workers are being compensated less than their counterparts at other Southern auto plants. This discrepancy became especially apparent after the UAW's record contract with Detroit's Big Three.
"An assembly worker in Volkswagen in Tennessee makes 15 percent less in hourly wages than an assembly worker at Ford Motor Company just up the road at Kentucky truck plant," Fain said. "And that's before profit sharing."
Fain argued that VW makes more than enough to pay and provide ample benefits to its American workers. In a slide presented during his speech, he pointed out that the VW Group made $24.4 billion in profit in 2023, a year in which its CEO made $10.5 million and the company paid more than $12.7 billion in dividends to shareholders.
According to the latest data from VW, the sole Volkswagen brand sold 100,612 cars in the United States during the second quarter of 2024. The Chattanooga plant, which produces VW's ID.4, Atlas and Atlas Cross Sport SUVs, accounted for roughly 34.5% of sales, which are up 31% year-over-year.
"But here's what we know: Volkswagen's most important market is right here in North America," Fain said. "Their path forward runs right through Chattanooga, Tennessee."
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Volkswagen has some outside troubles in Germany
The negotiations between the UAW and Vee-dub come at a difficult time for the Volkswagen Group, which is currently dealing with other union problems in its home country.
Volkswagen has been in hot water in Germany since early September after the company disclosed that it plans to break a solid 30-year-old job security agreement with labor unions in the country, like IG Metall, as it considers closing German auto plants.
The automaker has not closed a factory since 1988, when it shut down a plant in Westmoreland, Penn., however, the current German economic conditions are forcing storied companies like Volkswagen to reconsider their production footprints.
To make matters worse, VW is also behind schedule on an $11 billion cost-cutting program at its namesake brand as it seeks funds for critical investments, including a $5 billion investment for Tesla rival Rivian and a partnership with Chinese automaker Xpeng.
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"If more investments, such as in Rivian and XPeng, want to be achieved, those savings need to come from somewhere," European auto markets analyst Matthias Schmidt told Automotive News.
In July, VW hired former General Motors contract negotiator Christena Wilson to lead its contract negotiations. In a statement, Volkswagen expressed that it is committed to listening to its employees throughout the process.
"We will work tirelessly and collaboratively to reach a fair agreement that takes into account the unique nature of our single U.S. plant, our employees and the Chattanooga community," VW said. "This will ensure a strong and successful future for Volkswagen Chattanooga with the UAW."
Contract negotiations are expected to start on September 19 at 9 a.m.
Volkswagen AG, which trades as VLKAF on OTC markets, is down 0.037% at the time of writing, trading at $107.50 per share.
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