What investors should know about the UAW’s organizing drive of VW

DETROIT
–
The
United
Auto
Workers
notched
a
big
win
this
weekend.

Volkswagen
workers
in
Chattanooga,
Tennessee,
overwhelmingly
voted
in
favor
of
joining
the
UAW
late
Friday
–
marking
the
Detroit
union’s
first
victory
at
a
foreign-owned
automaker
plant
in
the
South.
The
vote
could
have
wide-ranging
impacts
on
other
automakers,
organized
labor
and
the
overall
U.S.
automotive
industry.

“This
is
a
really
profound
victory
for
the
UAW
and
the
labor
movement
in
general,”
said
Alex
Hertel-Fernandez,
a
former
Department
of
Labor
official
and
an
international
and
public
affairs
professor
at
Columbia
University. “It’s
also
a
really
decisive
victory.”

Union

organizing
passed
with
73%
of
the
vote,
or
2,628
workers,
in
support
of
the
UAW,
according
to
the
National
Labor
Relations
Board,
which
oversaw
voting
from
Wednesday
to
Friday.

The
German
automaker
and
union,
barring
any
challenges
to
voting,
are
expected
to
move
forward
with
bargaining
over
a
contract
for
roughly
4,300
workers
covered
under
the
vote.
The
NLRB
still
needs
to
certify
the
results.

Here’s
what
investors
should
know
about
the
vote
and
next
steps
for
the
UAW:

The
UAW
saw
the
Friday
vote
as
the
union’s
best
shot
at
organizing
the
VW
plant
following
strikes
and
record
contracts
with


General
Motors,


Ford
Motor
and
Chrysler
parent


Stellantis
in
2023.

The
union,
led
by
President
Shawn
Fain,
is
using
the
deals
with
the
Detroit
automakers,
which
included
record
wage
increases
and
benefits,
as
springboards
for
an
unprecedented
organizing
drive
of

13
non-union
automakers
in
the
U.S.

Other
than
Volkswagen,
the
union
is
targeting:
BMW,
Honda,
Hyundai,
Lucid,
Mazda,
Mercedes-Benz,
Nissan,
Rivian,
Subaru,
Tesla,
Toyota
and
Volvo.
The
drive
covers
nearly
150,000
U.S.
autoworkers,
according
to
the
UAW.

“This
is
likely
to
be
contagious,”
said
Hertel-Fernandez. “Where
workers
see
successes
in
organizing
or
strikes,
it
tends
to
inspire
further
action
in
that
industry
and
beyond
it.”

Next
up
for
the
union
are

5,200
Mercedes-Benz
workers
at
an
SUV
plant
in
Vance,
Alabama.
Workers
at
the
facility
earlier
this
month
filed
NLRB
paperwork
for
a
formal
election
that
is
scheduled
for
May
13
through
May
17.

“We’re
going
to
carry
this
fight
on
to
Mercedes
and
everywhere
else,”
Fain
told
VW
workers
Friday
night
following
the
historic
vote. “So,
thank
you
all,
thank
you
all
for
your
fight,
for
your
work.
And
let’s
get
to
it.
Let’s
go
to
work.
And
let’s
win
more
for
the
working
class
all
over
this
nation.”

Top
of
the
list
of
likely
impacts
from
organizing
efforts
at
VW
is
labor
costs.

UAW
organizers
used
the
record
contracts
with
the
Detroit
automakers
to
gain
support
for
the
union
in
Chattanooga.
UBS
said
in
an
investor
note
that
VW
has
a
relatively
low
operating
margin
in
the
U.S.,
and “substantial
pay
increases
could
undermine
the
profitability
outlook
of
the
local
US
operations.”

But
for
the
Big
Three
Detroit
automakers
—
and
their
shareholders
—
the
VW
organizing
drive
could
be
a
positive.

GM,
Ford
and
Stellantis
have
higher
all-in
labor
costs
than
non-organized
automakers
such
as
VW.
Depending
on
contract
details,
labor
pushes
like
VW
and
others
could
somewhat
even
that
playing
field.

“Overall,
given
the
substantial
pay
gap
between
UAW-unionized
workers
(Detroit-3)
and
non-unionized
workers
in
the
southern
states,
it
can
be
assumed
that
the
vote
will
lead
to
more
upwards
pressure
on
wages
for
VW
over
time,”
UBS
said
in
an
investor
note.

Before
last
year’s
contracts
with
the
Detroit
automakers,
all-in
labor
costs
for
Ford,
GM
and
Stellantis
were
between
$63
and
$67
an
hour,
according
to
industry
experts.
That
compared
with
workers
at
non-domestic,
or
transplant,
automakers
such
as
VW
at
$55
an
hour.
Those
costs
included
all
benefits
and
health
care
costs.

Still,
there’s
no
guarantee
that
VW
–
a
much
smaller
automaker
in
the
U.S.
–
will
agree
to
the
same
terms
as
the
traditional
domestic
automakers.

Fain
on
Friday
said “the
real
fight
begins
now,”
referring
to
the
expected
negotiations
between
the
union
and
VW.

The
VW
vote
was
widely
expected
to
be
the
easiest
in
the
UAW’s
organizing
plans,
as
the
union
had
already
established
a
presence
there
following
votes
that
narrowly
failed
in
2019
and
2014.

The
margin
of
success
in
Chattanooga
could
bode
well
for
UAW
efforts
at
other
automakers,
according
to
Sharon
Block,
a
professor
at

Harvard
Law
School
and
former
DOL
and
NLRB
official.

“I
think
it’s
really
hard
to
overestimate
the
importance
of
this
moment
and
to
overestimate
just
how
strategic
the
UAW
has
been
in
this
campaign,
which
I
think
suggests
that
this
is
not
the
last
time
that
we’re
going
to
be
talking
about
a
UAW
victory
in
an
auto
plant
in
the
South,”
Block
said.

Though
opposition
during
the
VW
vote
was
sparse,
the
most
notable
instance
came
a
day
before
the
election
began,
in
the
form
of
a
letter

from
six
Republican
governors
condemning
the
UAW’s
push
to
organize
automotive
factories
in
the
South
and
warning
of
potential
layoffs.

“We
have
worked
tirelessly
on
behalf
of
our
constituents
to
bring
good-paying
jobs
to
our
states.
These
jobs
have
become
part
of
the
fabric
of
the
automotive
manufacturing
industry.
Unionization
would
certainly
put
our
states’
jobs
in
jeopardy
—
in
fact,
in
this
year
already,
all
of
the
UAW
automakers
have
announced
layoffs,”
read
the
statement,
which
was
signed
by
governors
in
Alabama,
Georgia,
Mississippi,
South
Carolina,
Tennessee
and
Texas.

Block
called
the
letter
an “empty
threat”
and “cynical
ploy”
but
noted
that
increased
labor
costs
can
result
in
fewer
jobs.

Fewer
jobs
in
the
U.S.
automotive
industry
also
means
fewer
eligible
workers
for
union
membership.

Membership
with
the
UAW
at
the
Detroit
automakers
has
significantly
fallen
in
recent
decades,
as
free
trade
agreements
allowed
automakers
to
produce
vehicles
for
cheaper
elsewhere.

UAW
membership,
largely
made
up
of
autoworkers
but
also
including
workers
in
agriculture
and
aerospace,
peaked
at
1.5
million
in
1979.
As
of
last
year,
the
union’s
membership
was
370,239
workers
–
down
3.3%
from
2022
and
75%
from
its
peak.
Workers
from
the
Detroit
automakers
only
made
up
roughly
150,000
of
that
2023
total.

–
CNBC’s


Michael
Bloom

contributed
to
this
report.