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TheStreet Open House

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

Stocks in this article: FGM

Tennessee politicians were miffed when Volkswagen, at the urging of the metalworkers union, released a letter on Sept. 12 saying that the automaker "respects the employees' right for an employee representation on plant level at all locations worldwide. This certainly also applies to the Chattanooga plant." The UAW has said that a majority of workers at Chattanooga have signed cards expressing support for union representation.

The UAW's apparent in-road into organizing comes as the wages paid to employees at the newer Southern-based auto plants such as Toyota in Mississippi and Volkswagen in Chattanooga -- trail those of older transplants - Toyota in Georgetown, Kentucky or Nissan in Smyrna -- as well as those in Detroit.

"To remain non-union, the transplants would try be in the ballpark for wages and benefits," Harley Shaiken, a professor of labor relations at the University of California at Berkeley said in a phone interview. "But for some of the transplants, that has ceased to be the case."

Indeed, Volkswagen pays the lowest wages of any U.S. auto plant, according to the Center for Automotive Research, topping out at $19.50 an hour after three years. Wages start at $14 per hour, comparable to so-called 'second-tier' workers in the Detroit Three, where first-year first-tier employees can earn as much as $29.50 an hour. By comparison, the top wage at Toyota and Honda is $24 to $25 an hour. (Comparing wages and benefits across regions is tricky, but the Center estimates that VW's wages and benefits average $40 per hour whereas Toyota is at $55 an hour and the Detroit Three are at $60 to $64 per hour.)

The union drive in Chattanooga comes at a difficult time for VW's ambitious attempt to expand its U.S. sales. Volkswagen CEO Martin Winterkorn has pledged to reach 800,000 to one million units in the U.S. by 2018. Yet, sales of VW-brand vehicles, including the Passat sedan, declined 1.3% to 282,913 in the first eight months of 2013.

Volkswagen's relations with its workers were dealt a blow in April when the automaker announced that 500 temporary workers hired less than a year ago would be fired. As much as 20% of the labor force at the transplants are temporary workers, McAlinden said.

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