Important information for investors regarding the UAW’s organizing drive of Volkswagen

The United Auto Workers (UAW) recently achieved a significant victory by successfully organizing Volkswagen workers in Chattanooga, Tennessee. This marks the union’s first triumph at a foreign-owned automaker plant in the South and could have far-reaching implications for other automakers, organized labor, and the U.S. automotive industry as a whole.

The UAW’s success in Chattanooga is seen as a result of the union’s momentum gained from strikes and record contracts with General Motors, Ford Motor, and Chrysler parent Stellantis in 2023. The union, led by President Shawn Fain, aims to use these deals as a springboard for an unprecedented organizing drive of 13 non-union automakers in the U.S., including BMW, Honda, Hyundai, Mazda, Tesla, and Volvo. The UAW’s drive covers nearly 150,000 U.S. autoworkers.

Next on the union’s agenda is the organizing of 5,200 Mercedes-Benz workers at an SUV plant in Vance, Alabama. The workers at this facility have already filed paperwork with the National Labor Relations Board (NLRB) for a formal election scheduled for May 13 through May 17. The UAW is determined to carry on the fight for workers’ rights and aims to win more victories for the working class across the nation.

One of the key impacts of the UAW’s organizing efforts at Volkswagen is the potential effect on labor costs. The UAW organizers leveraged their record contracts with Detroit automakers to gain support in Chattanooga. While this may put pressure on Volkswagen’s profitability outlook in the U.S., it could be beneficial for the Big Three automakers – GM, Ford, and Stellantis – as it may help to level the playing field in terms of labor costs.

Before the 2023 contracts with Detroit automakers, all-in labor costs for Ford, GM, and Stellantis were between $63 and $67 an hour, compared to $55 an hour for workers at non-domestic automakers such as Volkswagen. However, it’s important to note that there is no guarantee that Volkswagen will agree to the same terms as the traditional domestic automakers.

The success of the UAW’s organizing efforts at Volkswagen is expected to have a positive impact on union jobs and membership. The margin of success in Chattanooga bodes well for future UAW campaigns at other automakers in the South. While opposition to the UAW’s push was sparse during the Volkswagen vote, Republican governors from six states issued a letter warning of potential layoffs if the unionization efforts were successful. However, experts view this letter as an “empty threat” and a “cynical ploy.” Increased labor costs could potentially result in fewer jobs, which in turn could lead to a decline in UAW membership.

Membership with the UAW has significantly fallen in recent decades due to free trade agreements that allowed automakers to produce vehicles for cheaper elsewhere. In 1979, UAW membership peaked at 1.5 million workers, but as of last year, it stood at 370,239 workers, a 75% decline from its peak. The UAW’s organizing drive aims to reverse this trend and strengthen the union’s presence in the automotive industry.

Overall, the UAW’s victory at Volkswagen is seen as a significant milestone for the union and the labor movement. It sets the stage for further organizing campaigns at other automakers and has the potential to impact labor costs in the industry. Investors should keep a close eye on these developments as they could have implications for profitability and competitiveness within the automotive sector.