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TheStreet Open House

Detroit's Big Three May Gain as UAW Sets Sights on VW in Tennessee

NEW YORK ( TheStreet) -- The United Auto Workers aren't the only ones who stand to gain if the labor union succeeds in organizing employees at Volkswagen AG's Passat plant in Chattanooga, Tennessee. General Motors (GM), Ford (F) and Chrysler could be winners too.

The Detroit Three could benefit even if the UAW's seemingly quixotic effort to organize a foreign-owned auto plant in the U.S. South ultimately fails, say industry experts. A victory is likely to reverberate throughout the industry.

GM, Ford or Chrysler could gain were Volkswagen, the world's second-largest automaker to Toyota Motor Corp (TM), forced to increase wages and benefits for its more than 2,000 employees at a Chattanooga plant, adding costs at the so-called "transplants," the Southern-based, European and Asian automakers that have consistently defeated union organizing since the factories began to locate in the region in the early-1980s.

"Trying to organize the 'transplants' is always good for the Big Three," said Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Michigan, in a phone interview. "It usually results in a transplant having to pay a special bonus, raising their wages; it also can cause some confusion in the plant. It's a wonderful tactic by the executives in Detroit."

Among manufacturing executives, it's called the "union threat effect," the possibility a union triumph can be enough to prompt management to attempt to sweeten worker compensation.

Shortly after employees at Nissan Motor Co. rejected a proposal for UAW representation in both 1989 and 2001, the company handed workers bonus checks, McAlinden said, and also raised wages. A bonus hadn't been paid at Smyrna for four years when Nissan workers received their check in 2001, he added. In addition, Nissan pledged to hire an additional 800 workers, with many of those hires coming from current employee referrals, following the 2001 vote, McAlinden said.

Nissan's Smyrna-based spokesman Justin Saia in an e-mail said the automaker operates a "standard compensation" program and that there was "no additional compensation provided outside of this program" at the time of the 2001 certification election. As for the new hires, Saia said "We were actively hiring during both of these periods to support the growth of demand for our products."

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