Over the weekend and again this week, business media has provided amplification of the labor union representation vote held at the Volkswagen manufacturing facility located in Chattanooga, Tennessee.  It was obviously a significant development concerning labor organizing efforts across the U.S. and the implications for management and labor relationships.

For readers who are not familiar with the events leading up to this election, they involve Volkswagen’s sanctioning of a union representation vote. Many of Germany’s large and small manufacturing and services enterprises embrace the concept of a “Works Council”, where direct representation from labor at the highest levels of management incorporates labor’s input on policies and practices related to work conditions, employee grievances or other matters related to compensation and benefits. Enterprise software provider SAP AG, incorporates the Works Council structure along with many other German firms. They are very much the fabric of encouragement of management and labor collaboration and shared benefits for companies.

The Chattanooga production facility was one of a very few Volkswagen global based facilities not having a formal Works Council and thus the German based IG Metall labor union advocated to Volkswagen’s senior management to encourage the formation of such a structure in the U.S.  It so happens that this same facility is located in the heart of the U.S. Southeast region where multiple automotive OEM’s have located their facilities because of the “right-to-work” non-union environment fostered across this region. Certain politicians across the South were not that pleased with the concept of a foreign based manufacturer actively supporting a unionization election. Thus, a large-scale lobbying effort began to unfold for fears that a union vote in Chattanooga would lead to other organizing efforts in this region.

The ultimate vote concerning the United Auto Workers (UAW) union attempts to represent Volkswagen’s Chattanooga’s workers failed to win a majority, but the vote was close, with a final reported tally of 712 to 626 indicating rejection of labor union organization.

Prior to the vote, the highly conservative leaning Wall Street Journal featured an Editorial striking fear for workers and other automotive manufacturers if the UAW was successful in its recruiting efforts. Elements of Republican Party led conservatives including anti-everything activist Grover Norquist, Tennessee U.S. Senator Bob Corker and Tennessee Governor Bill Haslam mounted a strong anti-union campaign including fears that future work at the plant would be suspended or at-risk if the plant voted for UAW representation. Vocal factions among Volkswagen’s production workforce added their own voices as well, mostly anti-union, with accusations that these factions were supported by outside interests.

With the election results now recorded, Supply Chain Matters wanted to weigh-in in an argument for civility and objectivity on both sides. First and foremost, our intent is not to take bias to either side, but rather to point out some observations that we believe need reflection and consideration.

On the anti-union side, it seems that we all tend to suffer from long-term memory loss. Reflect back to 2008-2009 when two of the largest automotive OEM’s in the United States, General Motors and Chrysler, were forced into bankruptcy. The situation was dire and there was a need for significant business re-structuring, to include finding an alternative to a significant industry burden of high direct labor, pension and healthcare costs.  During that crisis, the UAW worked with both OEM’s and U.S. government re-structuring teams to grant tiered wage concessions, reform pension programs and develop the creative solution for forming and funding a separate Healthcare Trust entity under the umbrella of the UAW, which allowed the industry to shift its legacy burdens to this trust. The trust itself was funded by one-time payments from individual OEM’s and from granted OEM stock ownership to the UAW which has its own value for the Trust. Today, both GM and Chrysler are again competitive and better able to compete in global and domestic markets.

During the same global economic crisis that severely impacted the Eurozone region, Works Councils across Germany collaborated with manufacturers large and specialized to avoid outright layoffs by agreeing to modify compensation structures and allow workers to keep their jobs. The solution was for labor to work somewhat less hours, with additional subsidies from the government of Germany provided to maintain adequate wage levels.  It is a recognized fact that these same German manufacturers were able to bounce back from the recession much more quickly because workers were not permanently displaced and skill levels were maintained. That by our lens, was evidence that Works Councils can be a positive force in business and labor collaboration and mutual gain sharing.

Certain labor unions are obviously not without fault.  Polls continue to indicate that non-unionized workers across the southern region of the U.S. generally are not favorable to unionization because workers do not perceive some of the value outlined above.  Workers have also voiced displeasure on being burdened with union dues that do not provide perceived continuous value.  Thus, U.S. labor unions need to continue with efforts to target the needs of workers and substantiate their value. Yet, across the U.S., there is mounting evidence that the income gap among the wealthiest and the rest of the working population grows ever wider.

When either of these factions begins what are perceived as heavy-handed tactics or threats, the other faction cries fowl.  Some manufacturers threaten to withdraw, suspend or not source work to a unionized facility.  Local politicians provide manufacturers incentives to locate in specific U.S. states that will foster right-to-work laws. National politicians advocate for less regulation, particularly when it concerns rights to organize and card check campaigns. Certain labor unions evangelize the evils of management, top-heavy management and the declared rights of workers to maintain a living wage.

What is missing is a level playing field where workers can determine in their own wisdom and judgment, whether their rights and welfare are being well served or whether they desire to be more represented directly at the management table.

The need for skilled manufacturing talent remains critical across multiple industry supply chains yet candidates are not attracted by perceived low current compensation levels for entry-level workers. Securing experienced talent that incorporates the voice and collaboration of direct labor workers remains a critical need for innovative, industry leading manufacturers. Whether that voice is obtained by small work groups, Works Councils or a unionized work force should be the purview of both parties, and without the need for threats and heavy-handed tactics.

In either case, supply chain leaders should have the leadership and collaboration skills to be able to manage in either environment.

Bob Ferrari