In April 2024, an overwhelming majority of workers at the Volkswagen plant in Chattanooga, Tennessee, voted to allow the United Auto Workers (UAW) union to represent the nearly 4,300 workers there.
The victory was significant for the UAW, as VW (VLKAF) The plant became the first foreign-owned auto plant in the American South to unionize after two failed attempts in 2014 and 2019. Union organizers and 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 union-negotiated contract could result in improved wages, working conditions and job security.
Related: UAW scored historic win with VW, but next challenge won't be easy
“This election is important,” said Kelcey Smith, a VW paint department worker. “People in high places told us that good things can’t happen here in Chattanooga. They told us this is not the time to rise up, this is not the place. But we rose up and we won. This is the time, this is the place. Southern workers are ready to rise up and win a better life.”
Five months later, the time has come for VW and the UAW to sit down at the negotiating table, but there may be more at stake for the German automaker.
The UAW comes to town
On September 15, UAW leaders held what they called a kick-off rally, where newly unionized VW workers showed their strong support and determination to win a fair contract.
In his speech, UAW President Shawn Fain laid out the union's top demands for Volkswagen: higher wages, profit sharing, cost-of-living adjustments, retirement security, affordable health care and the elimination of tiered wages.
It justified its demands during previous negotiations by pointing out that VW workers receive lower pay than their counterparts at other auto plants in the South. This discrepancy became especially evident after the UAW's record contract with the Big Three in Detroit.
“A Volkswagen assembly worker in Tennessee makes 15 percent less per hour than an assembly worker at Ford Motor Company, right next door to the 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 noted that the VW Group earned $24.4 billion in profits in 2023, a year in which its chief executive earned $10.5 million and the company paid more than $12.7 billion in dividends to shareholders.
According to VW's latest data, Volkswagen's single brand sold 100,612 cars in the U.S. during the second quarter of 2024. The Chattanooga plant, which produces VW's ID.4, Atlas and Atlas Cross Sport SUVs, accounted for about 34.5% of sales, up 31% year-over-year.
“But what we do know is that Volkswagen's most important market is here in North America,” Fain said. “Their path to the future runs through Chattanooga, Tennessee.”
More about automotive:
- The Toyota Crown is a masterclass in cheap, quiet luxury
- Ford makes radical change that could anger loyal customers
- Gavin Newsom's electric vehicle mandate is under threat from the US Supreme Court
Volkswagen has some external problems in Germany
The negotiations between the UAW and Vee-dub come at a difficult time for the Volkswagen Group, which is currently facing other union problems in its home country.
Volkswagen has been in trouble in Germany since early September after the company revealed it plans to break a 30-year-old job security agreement with the country's unions, such as IG Metall, as it considers closing German car plants.
The automaker has not closed a factory since 1988, when it shuttered a plant in Westmoreland, Pennsylvania, but current German economic conditions are forcing legacy companies like Volkswagen to reconsider their manufacturing footprint.
Making matters worse, VW is also behind schedule on an $11 billion cost-cutting program at its namesake brand as it seeks funding for critical investments, including a $5 billion investment for Tesla rival Rivian and a partnership with Chinese automaker Xpeng.
Related: House passes bill that could cripple US EV development
“If you want to get more investments, like with Rivian and XPeng, those savings have to come from somewhere,” says European automotive market analyst Matthias Schmidt. told Automotive News.
In July, VW hired Christena Wilson, a former contract negotiator at General Motors, to lead contract negotiations. In a statement, Volkswagen said it was 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 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 begin on September 19 at 9 a.m.
Volkswagen AG, trading as VLKAF on the OTC markets, is down 0.037% at the time of writing, trading at $107.50 per share.
Related: Veteran fund manager sees world of trouble ahead for stocks
