Michael Kurth Wednesday, March 5, 2014 0

The United Auto Workers union was dealt a stunning defeat last week when workers at the Volkswagen plant in Chattanooga rejected their bid to organize the plant.

The vote was relatively close — 712 to 626 — but the union had been expected to win handily, because the German automaker had said they actually wanted their workers to be represented by a union.

This was an important vote for the UAW. Its membership has dwindled from 1.5 million in 1979 to only 382,000 today, as U.S automakers shut down expensive and inefficient unionized assembly plants in the North and shifted production to countries like Canada and Mexico, while foreign automakers such as Toyota, Honda, Nissan and Volkswagen penetrated the U.S. market by building assembly plants in the South.

Chattanooga was to be the first step in the UAW’s strategy to rebuild its membership by organizing the 14 foreign-owned auto plants in the South, none of which are represented by a union.

The UAW was not Volkswagen’s first choice. The German automaker had a disastrous experience with the union when it took over a Chrysler plant near Pittsburgh in 1979 to produce its Golf, Rabbit and Jetta models. It closed the plant in 1988, after nearly a decade of labor unrest, wildcat strikes and low-quality production.

Volkswagen would have preferred to organize its workforce along the lines of the German system, where blue- and white-collar employees directly elect representatives to sit on “work councils” that deal with issues such as layoffs, pay cuts and changes to working condition. It’s an arrangement that tends to produce a high degree of labor/management cooperation.

Japanese automakers also promote labor/management cooperation through “quality circles,” which include blue- and white-collar employees, to identify and solve problems within the plants. And career development for engineers and managers includes working on the factory floor, with the result that many senior Japanese executives served as union leaders in their companies at earlier stages in their careers.

The Europeans and Japanese understand that labor and management are rowing the same boat, and that progress depends on cooperation.  Many companies and unions in the U.S. have also come to this realization, but our archaic labor laws often inhibit labor/management cooperation.

The legal foundation for U.S. labor law is the Wagner Act, which was passed in 1935 during the depths of the depression. It was widely assumed in the Roosevelt administration that there was an inherent conflict between the interest of management, which seeks to increase its profits by reducing workers’ wages, and workers who want higher wages and better working conditions. Thus, the Wagner Act created powerful adversarial unions to take on the large corporations.

Under the Wagner Act, if a majority of workers vote to join a union, the union is granted the exclusive right to engage in collective bargaining with the company, union membership becomes a condition for employment, and all employees must pay dues to that union, even though the money may be used for political activities that some union members may oppose.

Moreover, the companies are not allowed to interfere with union activity, or even to communicate with their employees, lest they be accused of operating an illegal “company union.”

My introduction to adversarial unionism came 50 years ago in Michigan. After graduating from high school, I went to work on the assembly line of a General Motors plant, and I had to join the UAW as a condition of my employment. Shortly after I was hired, the plant manager came by my work station, introduced himself, and said he had been a friend of my father, who had passed away 15 years earlier. He just wanted to say hello and wish me luck on my new job. But soon union agents swooped in and sternly reprimanded me: I was not to speak to management, even to say hello; all communication must go through the union.

Thing have changed in 50 years, to be sure.  In the 1990s, in response to pressure to promote labor/management cooperation within U.S. companies, the National Labor Relations Board, which administers the Wagner Act, began to allow some cooperative committees to be formed, but only within a framework that preserved the independence of the unions.

The dilemma Volkswagen now faces in Tennessee is that it can only set up the work councils it wants if its workers vote to join a union. If Volkswagen attempts to organize work councils on its own, it will be accused of operating a company-sponsored union, which is illegal under the Wagner Act.

How can the U.S. compete in the global economy with labor laws designed in the 1930s? The “re-industrialization” of America requires more than just tweaking our tax laws. If we want to stop the exodus of U.S. manufacturing firms and encourage more foreign manufacturers to locate here, we must move away from the adversarial unionism of the Wagner Act towards integrative labor/management relations that allow innovation and creativity to promote cooperation.