In a compromise that involves the formation of a UAW local, Volkswagen Group has announced that its new midsize SUV will the built in Chattanooga starting at the end of 2016. The expansion was held up over the lack of a union and a works council arrangement that exists in every other VW plant in the world. State and local officials – including the Governor and Senior Senator – threatened to withhold subsidies if a union was formed for the expansion that doubles the workforce to 4,000.
The sprawling plant in Tennessee already builds the Passat sedan for the U.S. market. In 2008, the state put up at least $555 million for the new assembly plant in Chattanooga, in a controversial deal that resulted in the largest subsidy package – 10 different ones – ever offered to an offshore automaker to come to the United States. When it opened in 2011, and up until now, like all such subsidized transplants, Chattanooga has been non-union.
Participation in what is a newly formed UAW Local 42 is claimed to be voluntary, and there are no dues, at least so far. Last February, workers at the plant narrowly voted 712 to 626 against the union.
It was not immediately clear what the Chattanooga expansion will cost Tennessee taxpayers. A number bandied about yesterday in Germany claimed incentives of $166 million toward development and another $12 million for training. However, at least $300 million was offered, according to a leaked memo earlier this year for what critics call, with justification, corporate welfare.
The VW Group is among the most profitable auto enterprises in the world, with $270 billion in revenues during 2013 coming from sales of 9.731 million. The Volkswagen Group reported further growth in deliveries during the first half of 2014, handing over almost five million vehicles during this period
“Upon Local 42 signing up a meaningful portion of Volkswagen’s Chattanooga workforce, we’re confident the company will recognize Local 42 by dealing with it as a members’ union that represents those employees who join the local,” said Gary Casteel, the UAW’s secretary-treasurer, who previously served as director of UAW Region 8 covering the South.
This could get very complicated in the anti-union south, opening up questions about wage structures, fees to non-union and or union workers not paying dues for negotiation costs or of work rules, unequal distribution of vacation time, among other potential issues.
The VW Group says it is investing a total of $900 million (€643 million) in the production of a newly developed, seven-passenger SUV, creating 2,000 additional jobs in the US. About $600 million (€432 million) will be invested there.
Volkswagen also announced that the Chairman of the Group Works Council of Volkswagen, Bernd Osterloh, would join the Board of Directors of Volkswagen Group of America.
“We are pleased that Mr. Osterloh has declared his willingness to play a concentrated role in shaping our US strategy in the future. He will represent the views of the workforce. This is in line with the co-determination culture of Volkswagen, which is one of our key success factors,” Group Chairman Martin Winterkorn said.
The new three row, six or seven passenger SUV will be integrated into existing plant buildings for the assembly of the midsize crossover. A total floor space of 538,000 sq. ft. will be added to the existing production facility. The SUV is based on the CrossBlue concept vehicle that made its global debut at the 2013 North American International Auto Show in Detroit.
From 2014 to 2018, the Volkswagen Group claims it will be investing more than $7 billion in the US and Mexico. It is Volkswagen’s stated goal to deliver 800,000 vehicles in the US by 2018. During 2013, the Group –Audi, Bentley Lamborghini, and VW – sold 570,000 vehicles or -2% y-o-y, in a market that grew by 8%. Part of the problem is that the VW brand in particular does not have a full line up suitable for the US, lacking pickup trucks. It re-badges minivans made by Chrysler.