Volkswagen supplier question cranks up UAW debate

Volkswagen supplier question cranks up UAW debate

February 13th, 2014 by Mike Pare in Business Around the Region

A worker fixes a sign at a Volkswagen Golf car.

Photo by Associated Press/Times Free Press.

UAW DECISION

The UAW vote started Wednesday, despite the winter snow storm, and will continue through Friday night.

BY THE NUMBERS

* 905 - Auto manufacturers and suppliers in Tennessee

* 115,939 - Tennesseans employed in auto manufacturing

* $80.8 million - Amount state has invested in training for auto industry since 2006

* $6.4 billion - Annual payroll for Tennessee's auto industry

Source: Tennessee Department of Economic and Community Development

Pro- and anti-union supporters are using the Chattanooga region's prospects of wooing more suppliers as a wedge to gain votes for and against the United Auto Workers in this week's vote by Volkswagen plant employees.

Republican politicians in the state, including U.S. Sen. Bob Corker and Gov. Bill Haslam, claim that business already has been hurt by the UAW discussion and they see future harm if the union wins.

However, Democrat politicians counter by saying that view goes against the General Motors plant experience in Spring Hill, Tenn., which they say has successfully recruited suppliers.

Mark Sweeney, senior principal of the site selection firm McCallum Sweeney Consulting, said Wednesday that he foresees a negative impact in the Chattanooga area's ability to attract suppliers should the UAW win, though the extent is hard to gauge.

"I think fewer companies will consider that location," said Sweeney, whose company operates out of Greenville, S.C.. and helped the Tennessee Valley Authority establish is megasite program for auto manufacturers a decade ago.

Because of Chattanooga's proximity on the state line, Sweeney said companies may opt to take a harder look at North Georgia and North Alabama, though Alabama already has a union presense, he said.

"They might go to a different jurisdiction that might be a little less prone to UAW influence," Sweeney said.

Jack Nerad, Kelley Blue Book's executive market analyst, said there "might be a bit of a pause" by some suppliers to land in the Chattanooga area.

"I think typically a supplier would want to avoid [a union] if they could," he said.

But, Nerad said, labor is just one piece of the puzzle when a company is trying to decide whether and where to build a new plant.

"But labor is a critical piece," he said.

Mike Herron, chairman of the UAW Local 1853 at the General Motors plant in Spring Hill, said companies understand the financial benefits of doing business, whether its customers are unionized or not.

"There has been absolutely no difficulty in getting suppliers to supply the unionized plant in Spring Hill," he said. "I respectfully disagree with the recent comments made by Gov. Haslam about attracting new automotive suppliers to Tennessee."

He said suppliers are interested in making money.

"We have no shortage of suppliers willing to fill the requirements," Herron said.

Herron said GM will add at least another 1,800 jobs at the Spring Hill plant with the addition of two new products.

"GM does not have any problem attracting suppliers to Tennessee or getting incentives from the state. When you're going to bring 2,000 jobs to the state, people are interested in participating," he said.

Sweeney said suppliers that have a lot of flexibility over where they can go are sensitive to the cost of union operations. He said union shops usually have higher wages, more jobs per output and some different work rules.

UAW presence in Tennessee remains limited. Among more than 900 automotive suppliers in the state, UAW has contracts with employees in only 13 companies.

A big question mark, if the UAW wins, is what signal will VW send to its suppliers, he said. Sweeney said the UAW may look at organizing the company's supplier network.

"Is it possible that VW would provide some influence" on the behalf of the UAW? he asked.

Nerad said that companies like to supply more than just one plant, and where a company locates is dependent on other automakers' operations.

He said that a potential lure to suppliers will be VW's Chattanooga plant landing a new sport utility vehicle to assemble.

"Getting the SUV into the plant would probably double output, or more," Nerad said. "That's a red-hot market. The world, or at least America, is waiting for a new midsize Volkswagen SUV."

The Chattanooga plant is said to be the frontrunner for a new SUV, though it's competing with Mexico.

Herron said that what suppliers look for is a commitment by the car company to the product.

"There are a significant number of suppliers that line up to supply a plant of one of these major [car companies]," he said.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.