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Exclusive: VW divided on union for U.S. plant but worker vote a must

The logo of Volkswagen is pictured during a media preview day at the Frankfurt Motor Show (IAA) September 10, 2013. REUTERS/Pawel Kopczynski
The logo of Volkswagen is pictured during a media preview day at the Frankfurt Motor Show (IAA) September 10, 2013. REUTERS/Pawel Kopczynski

By Bernie Woodall and Ben Klayman

DETROIT (Reuters) - Volkswagen AG's top executives are divided over whether and how workers at the company's Tennessee assembly plant should be represented by a union, but ultimately will insist on a formal vote by those employees, a person with knowledge of the board's thinking said.

While VW's U.S. executives are hostile to the United Auto Workers, the eight-member management board may still ask the union to help set up a German-style employee board at the Chattanooga plant, said the person, who asked not to be identified.

The top executives feel that any final decision must be approved by the workers in a secret ballot to protect VW's reputation and assuage investors and U.S. politicians, said the source, who did not identify the VW executives.

Such a decision could be a blow to the ambitions of the UAW, which has made organizing foreign-owned assembly plants in the South a top priority to bolster its membership, which has shrunk by about three-quarters since its peak in 1979. UAW leaders have said such a vote would allow anti-union forces to scare workers into voting against the union.

A UAW success at Chattanooga could alter the industrial relations landscape for foreign carmakers in the United States, opening the door to similar organizing efforts at plants owned by Germany's BMW in South Carolina and Daimler AG's Mercedes-Benz in Alabama, and possibly those owned by Japanese and South Korean automakers, analysts have said.

How this issue plays out also could affect whether and when VW's Tennessee plant gets to build a seven-passenger crossover vehicle, the source said. The two-year-old plant, which currently builds only the Passat sedan, was designed to produce more than one vehicle.

The UAW has said it has support of the majority of the 1,567 hourly workers at the Tennessee plant. UAW President Bob King told Reuters last month the union, seeking to avoid what it fears would be a divisive election process, would like the German automaker to voluntarily recognize the union as the plant's bargaining unit.

Critics argue such an approach would be undemocratic. An employee in the plant's paint shop, Mike Burton, said he has gathered more than 600 signatures from VW Chattanooga hourly employees on an anti-UAW petition.

A VW spokesman declined to comment beyond the company's past confirmation of talks with the UAW and that any decision would be made by the employees. VW's U.S. executives have said in the past, however, that the plant workers would need to vote on such a decision.

Gary Casteel, director for the UAW region that includes Tennessee, said on Thursday that the union continues to have ongoing discussions with Volkswagen, adding that he has not heard of any decision by the VW management board on whether it will recognize the UAW.

DECISION NOT SOON

Any decision by VW's board does not seem near, however. Management is divided on the issue of whether the U.S. plant should adopt a German-style form of representation - also known as co-determination - where hourly and salaried employees sit together on a board called a works council, the source said.

Members of VW's management board do not want to signal any support for a union before a formal vote by the employees, the source said.

Some on the board are open to the idea of a works council that includes the UAW, while others are seeking to delay the decision as all the parties negotiate what such a board would look like and how it would operate, the source said.

U.S. labor law requires that any works council be paired with a U.S. trade union.

Board members against the idea also are sensitive to the views of politicians and other anti-union voices, the source said.

Last month, Tennessee Republican Senator Bob Corker said it would be a mistake for VW to allow the UAW to organize workers at its Tennessee plant. He called that possibility a "job-destroying idea" and said it would make the company a "laughingstock in the business world.

VW's U.S. management is more hostile to the UAW behind the scenes, but that does not matter and the final decision rests with management in Wolfsburg, Germany, where VW is based, the source said.

The German automaker's top labor leader, Bernd Osterloh, on Monday lent weight to the UAW's efforts, saying he wanted to see a works council formed at the plant and he would keep talking with the U.S. union and with workers at the Chattanooga plant. Osterloh sits on VW's 20-member supervisory board.

Osterloh has said he plans to meet politicians and other supporters and opponents of the UAW in Tennessee in the next few weeks. The source said the head of the global works council likely will not visit Tennessee until next month as talks on VW's rolling mid-term budget are under way.

Those budget talks include the possibility of the Tennessee plant building a seven-passenger crossover utility vehicle, a project that a U.S. executive last month said may be shifted to a VW plant in Puebla, Mexico.

The vehicle, based on the "CrossBlue" concept unveiled in January at the Detroit auto show, would be sold in the U.S. market by either 2016 or 2017, the executive said.

(Additional reporting by Andreas Cremer in Berlin; Editing by Steve Orlofsky)

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