A Volkswagen is seen in the employee parking lot at the Volkswagen Automobile Assembly Plant in Chattanooga, Tennessee on March 20, 2024.

Eliza Novelz getty images

DETROIT – The United Auto Workers scored a major victory this weekend.

volkswagen Workers in Chattanooga, Tennessee voted overwhelmingly in favor of joining the UAW – marking the Detroit union’s first victory at a foreign-owned automaker plant in the South. The vote could have broad implications for other automakers, organized labor, and the overall U.S. automotive industry.

“This is a huge victory for the UAW and the labor movement in general,” said Alex Hertel-Fernandez, a former U.S. Labor Department official and associate professor at Columbia University. “This is also really a decisive victory.”

Milan event passed According to the National Labor Relations Board, which monitored voting from Wednesday through Friday, the UAW had 73% of the vote, or 2,628 workers, in support.

Barring any challenges in the vote, the German automaker and the union are expected to move forward with bargaining on a contract for about 4,300 workers subject to the vote. The NLRB still needs to certify the results.

Here’s what investors need to know about voting and next steps for the UAW:

uaw speed

The UAW saw last week’s vote as the union’s best effort to organize the VW plant after strikes and record contracts. General Motors, ford motor and chrysler parent Stellantis In 2023.

The union, led by President Sean Fain, is using deals with Detroit automakers, which include record wage increases and benefits, as a springboard for an unprecedented organizing campaign. 13 non-union automakers in America

In addition to Volkswagen, the consortium is targeting: BMW, Honda, Hyundai, Lucid, Mazda, Mercedes-Benz, Nissan, Rivian, Subaru, Tesla, Toyota and Volvo. According to the UAW, the campaign involves approximately 150,000 American autoworkers.

“It is likely to be contagious,” Hertel-Fernandez said. “Where workers see success in organizing or striking, it inspires further action in that industry and beyond.”

Kelsey Smith displays UAW buttons in Chattanooga, Tennessee on April 10, 2024.

Kevin Worm | Washington Post | getty images

are next for union 5,200 Mercedes-Benz employees At an SUV plant in Vance, Alabama. Staff at the facility filed NLRB paperwork earlier this month for a formal election to be held from May 13 to May 17.

“We will continue this fight at Mercedes and everywhere else,” Fahn told VW workers on Friday night after the historic vote. “So, thank you all, thank you all for your fight, thank you all for your work. And let’s move forward. Let’s go to work. And let’s win more victories for the working class in this country.”

impact on labor costs

Labor costs top the list of potential impacts from organizing efforts at VW.

UAW organizers used record contracts with Detroit automakers to gain support for the union in Chattanooga. UBS said in an investor note that VW has relatively low operating margins in the US, and “substantial wage increases could weaken the profitability outlook of local US operations.”

But for the Big Three Detroit automakers – and their shareholders – VW’s organizing campaign could be a positive.

GM, Ford and Stellantis have higher labor costs than non-unionized automakers like VW. Depending on the details of the contract, labor could level that playing field somewhat, as could VW and others.

United Auto Workers President Sean Fain cheers on US President Joe Biden during the State of the Union address to a joint session of Congress in the House Chamber of the US Capitol on March 7, 2024 in Washington, US.

Evelyn Hockstein | reuters

“Overall, given the substantial wage gap between UAW-unionized workers (Detroit-3) and non-unionized workers in Southern states, it can be assumed that the vote will put greater upward pressure on wages for VW over time,” UBS said in an investor note.

Before last year’s deal with Detroit automakers, total labor costs for Ford, GM and Stellantis were between $63 and $67 an hour, according to industry experts. That compares with non-domestic, or transplant, workers at automakers like VW at $55 an hour. Those costs included all benefits and health care costs.

Still, there’s no guarantee that VW – a much smaller automaker in the US – will agree to the same terms as traditional domestic automakers.

“The real fight starts now,” Fain said, referring to talks expected between the union and VW on Friday.

union jobs

The VW vote was widely expected to be the easiest of the UAW’s organizing plans, as the union had already established a presence there after marginally unsuccessful votes in 2019 and 2014.

According to Professor Sharon Block, the margin of success in Chattanooga could bode well for other automakers’ UAV efforts. Harvard Law School and former DOL and NLRB officials.

“I think it’s really hard to underestimate the importance of this moment and how strategic the UAW has been in this campaign, which I think is not the last time we talk about a UAW victory.” Going to do it in an auto plant down south,” Block said.

Although protests during the VW vote were few, the most notable example came in the form of a letter the day before the election began from six Republican governors The UAW’s effort to organize automotive factories in the South was condemned and warned of possible layoffs.

“We have worked tirelessly on behalf of our constituents to bring good-paying jobs to our states. These jobs have become part of the fabric of the automotive manufacturing industry. Unionization will certainly put our states’ jobs at risk – literally In the U.S., already this year, all of the UAW’s automakers have announced layoffs,” read the statement, which was signed by the governors of Alabama, Georgia, Mississippi, South Carolina, Tennessee and Texas.

Block called the letter a “hollow threat” and a “cynical ploy”, although said increased labor costs could result in fewer jobs.

Fewer jobs in the American automotive industry also means fewer workers eligible for union membership.

Membership with the UAW at Detroit automakers has declined significantly in recent decades, as free trade agreements have allowed automakers to make vehicles more cheaply elsewhere.

UAW membership, composed primarily of autoworkers but also including agricultural and aerospace workers, reached 1.5 million in 1979. As of last year, union membership stood at 370,239 workers – down 3.3% from 2022 and 75% below its peak. The total number of workers at Detroit automakers in 2023 is only about 150,000.

– CNBC michael bloom Contributed to this report.

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