Tennessee was afraid of the United Auto Workers. Here’s why it shouldn’t be.

You can only move so much of this to Mexico. (Jeff Roberson/AP)
You can only move so much of this to Mexico. (Jeff Roberson/AP)

It's been four days since the United Auto Workers suffered its stunning reversal in Chattanooga, Tenn., after years of trying to organize a Volkswagen plant there, and explanations for the failure abound: Workers distrusted a union that had already made painful concessions to the industry, the UAW failed to work with community groups, the cultural divide with the South was too wide to bridge, there was no real oppressor to organize against.

All have merit. But in the background, always, is the fear of Republican lawmakers and workers alike that the UAW could have a negative influence on Volkswagen -- which in turn would scare off other manufacturers looking for a place to set up shop, or even cause other companies to pull up stakes, if the union managed to organize them as well. Take State Rep. Mike Sparks (R) of Smyrna, who is absolutely positive that Nissan would leave his district if the UAW ever won an election there, and so opposes the UAW -- even though he's upset with Nissan for doing things that unions are often able to help prevent, like hiring temp workers instead of full-time ones.

Is that true, though? Would a strong UAW actually drag down the companies that host it, and repel others thinking of coming in?

The answer, on both counts, is almost certainly not.

Let's take the first question. Are unionized companies now less productive than their non-union competitors? Well, that might have been the case through the mid-2000s, as the Detroit Three's workforces aged and the cost of generous pensions mounted (and the companies weren't doing themselves any favors, having misjudged the market for lighter and more fuel efficient vehicles). But according to data gathered by Oliver Wyman analyst Ron Harbour, the American automakers had nearly caught up to Toyota and the rest by 2008 through lean production processes and buyouts of older workers. Restructuring, a new product mix, and revived demand got them the rest of the way there; Michigan plants are now by and large running at peak capacity.

"You can't today make a conclusive statement that the presence of a union in a plant makes that plant any less competitive," says Harbour, whose report now includes productivity data from most global automakers (they participate on the condition that it not be publicly released). The UAW, meanwhile, has become more of a partner than an opponent. "They used to fight against efforts to make the plant more productive, but they realize it's what makes the vehicle cost competitive, and therefore sustains the long-term viability of the plant," Harbour says.

Of course, that's also because the union agreed to a two-tiered wage structure, under which new hires get paid around $14 an hour while old hands make closer to $30, plus excellent retirement and health care benefits -- something that's made joining the union less attractive, especially in the German automakers, which already pay somewhere in the middle. For that reason, pro-UAW organizers at the Volkswagen plant focused on the benefits of representation and coordination with management, rather than a long-term monetary upside. But if the employees have less to gain from joining a union, financially, the companies have less to lose -- which is why policymakers shouldn't fear them taking root.


Michigan is closing the gap. (Brookings Institution)

Now, the next question: Would a union presence damage Tennessee's business-friendly reputation enough to repel companies looking for a spot to land, or make existing ones disappear?

Again, the answer is almost certainly not, for several reasons.

First of all, a factory is a huge investment, and while businesses might not welcome a union, having one isn't enough to make them abandon it. "You don't build a plant and just walk away from it," says Kristin Dziczek, a labor specialist at the Center for Automotive Research. "I don't see that as a really viable option." Besides, she notes, it's not like the South is completely bereft of organized automakers: The General Motors plant in Spring Hill, Tenn. has been unionized since it was built. "That facility, which employs several thousand people, has not led to mass unionization and exodus of suppliers," she says.

And second of all, there are lots of reasons why automakers need to have production in the United States. Unlike with consumer goods like shoes or kitchen appliances, cars are really heavy, and shipping costs can get prohibitive. Also, importing cars can get tricky from a currency perspective -- that's why automakers like to produce cars within the market that buys them. "It's a huge issue, especially with the Japanese producers," Dziczek says. "You could be making vehicles very cost effectively in Japan, but the currency's out of whack, so you're selling them at a loss."

And if you're thinking about the price of labor -- well, it's only about 10 percent of what it actually costs to produce a car. And at the moment, labor's still cheaper in Mexico anyway. That's why the Brookings Institution, which did an incredibly detailed report on Tennessee's auto industry last year, emphasizes that low wages aren't what states should be focusing on.

"The U.S. is going to have to compete on productivity, great quality, and innovation," says Mark Muro, director of Brookings' Metropolitan Policy Program. "Cost is not the only element of competition between places now. Competition is real, it just will be waged over the next decade on a much broader variety of dimensions."

That means a constant supply of well-educated and happy workers, which unions can help with. It also means robust infrastructure, which can only be paid for through a healthy tax base of people making a decent living. Without those things, no amount of wage suppression will make a difference.

Mexico's taking off, but Tennessee's holding its own. (Brookings Institution)
Mexico's taking off, but Tennessee's holding its own. (Brookings Institution)
Lydia DePillis is a reporter focusing on labor, business, and housing. She previously worked at The New Republic and the Washington City Paper. She's from Seattle.
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