A union-free VW could get the works council in Tennessee

February 18, 2014: 11:40 AM ET

The UAW should rethink its southern strategy, because states like South Carolina and Mississippi could be less hospitable than Tennessee.

By Doron Levin

140218104740-volkswagen-plant-chattanooga-620xaFORTUNE -- The vote that narrowly defeated the United Auto Workers at Volkswagen's plant in Chattanooga is history. VW now has a tricky task on its hands, for the automaker has said it wants a works council in its factory -- is that still possible without a union?

History would suggest that setting up a German-style works council would be precarious for VW and might provoke complaints by pro-union workers to the National Labor Relations Board. The UAW in any event may challenge the results of last week's election on the grounds of irregularities by "outside forces," in the words of Bob King, UAW president.

Works councils are consultative bodies of managers and workers, fairly common in Germany, that may set policy on matters from smoking to wages and bonuses. Federal labor law in the U.S. tightly controls what can be decided by groups that are effectively dominated by management.

MORE: Why should UAW monopolize worker-management dialogue?

Complicating matters further, VW also is on the verge of deciding where to build its next-generation midsize crossover, in Chattanooga or in its factory in Puebla, Mexico -- bringing more jobs and job security to the plant that wins. If the automaker chooses Puebla, based purely on economics, VW might strengthen and tip the balance toward the pro-UAW faction at the factory -- and alienate anti-UAW politicians like Bob Corker, the state's Republican senator.

Volkswagen's U.S. dealers are restive, because many have invested in new facilities over the past several years with the understanding that the German automaker was committed to provide a parade of new models -- a midsize crossover chief among them. For the moment, dealer worries are being overshadowed by the labor questions; unless they're resolved satisfactorily, VW's franchise and the investment of U.S. dealers are at risk.

"Bottom line, VW can have a works council if it puts its money where its mouth is and sets one up, giving the council full authority for the matters deferred to it," said John Raudabaugh, a law professor at Ave Maria Law School in Naples, Fla., and a former member of the National Labor Relations Board.

Had the UAW won last week's election, it could have represented VW workers for all issues, including wages and benefits, as well as matters affecting vehicle production. VW now might decide to set up a works council with authority over matters that are less crucial to the company, Raudabaugh said. If the workers wished to create their own labor union, they could do so as well. A third option would be to join another union.

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The UAW has said its lawyers are reviewing their options. Objections to the election must be filed with the NLRB within seven days, unfair labor practice complaints within six months of the alleged violation.

The UAW should think carefully before it pushes its southern strategy to try and organize other transplants. Chattanooga was its best chance. Other employers won't be as accommodating as VW, and states like South Carolina and Mississippi could be more hostile than Tennessee. If the union wishes to break from its confrontational past, it has to project that message loud and clear and prove that it's genuinely constructive.

Only then might a majority of workers see the benefit of membership.

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