Labor Unions

As Union Moves In, Volkswagen Will Build Its SUV in Tennessee


Volkswagen (VOW:GR) will build a new mid-sized sport utility vehicle at its Tennessee plant, creating about 2,000 new jobs, as it seeks to reverse laggardly sales in the U.S.

The company’s chief executive, Martin Winterkorn, described the move in a press release as “going on the attack again in America.” But the auto maker’s decision simultaneously invalidates a high-profile line of attack repeated by opponents of organizing by the United Auto Workers at VW’s Chattanooga plant.

During a unionization vote earlier this year, critics such as U.S. Senator Bob Corker (R.Tenn.) warned that a labor victory would prompt the company to build elsewhere, perhaps in Mexico. VW officials said that the plant’s expansion was not connected to the vote outcome. Now, a week after UAW opened an office at the plant and began trying to sign up workers, the company announced the decision to build its SUV in Chattanooga.

In its public comments about unionization, Volkswagen officials have remained neutral and insisted that workers should decide. The company has mainly described its interest in installing a German-style “works council” at the plant, similar to the structure it maintains at other assembly plants around the world.

Underscoring that point, VW said on Monday that Bernd Osterloh, chairman of the company’s worker council, would become a director of Volkswagen Group of America—hardly an anti-union move. Back in February, days after the union effort lost in a vote by Chattanooga workers , Osterloh was quoted in a German newspaper saying that future VW investments in America may not be in the South, given the region’s hostility to labor unions.

Chattanooga is the site of Volkswagen’s only U.S. plant, where it currently builds Passat sedans. The company is trying to double U.S. sales to 800,000 vehicles over the next four years but has struggled in the U.S. market. June sales declined 22 percent.

The new, seven-passenger SUV will begin production in late 2016 and is based on the CrossBlue concept VW introduced at the North American International Auto Show last year in Detroit. It will be designed for the U.S. market and fit between VW’s existing compact Tiguan and larger Touareg models.

The company said it would invest $900 million to bring the SUV to market, with two-thirds of that spent in Tennessee.

Bachman is an associate editor for Businessweek.com.

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