VW's latest move might compromise the good graces of the UAW
Volkswagen (VLKAF) is set to negotiate a contract with the United Auto Workers (UAW) after workers at its Chattanooga plant voted for union representation. However, VW's decision to suspend ID.4 production due to a safety recall and furlough 200 workers has raised concerns about its commitment to fair negotiations. UAW leaders have secured layoff pay for affected workers, and VW aims to reach a fair agreement while addressing the unique circumstances of its U.S. operations. The company is currently down 2.56% in stock price.
This week, Volkswagen (VLKAF) and the United Auto Workers are set to negotiate a contract after an overwhelming majority of workers at Volkswagen's Chattanooga, Tennessee plant voted to allow the United Auto Workers (UAW) to represent the nearly 4,300 workers there back in April.
The win at Chattanooga is a huge one. It represents a major victory in the otherwise labor-unfriendly American South and a win after two unsuccessful attempts to unionize in 2014 and 2019. In light of this, the UAW hopes the German automaker's workers will get their fair share.
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"But here's what we know: Volkswagen's most important market is right here in North America," UAW president Shawn Fain said at a rally. "Their path forward runs right through Chattanooga, Tennessee."
However, the talks come as VW also faces labor issues in its home country, and a new development stateside might put itself in a bad place with the UAW.
Volkswagen
VW hits the brakes on ID.4 production
Volkswagen is set to suspend the production of its ID.4 EV crossover at the Chattanooga plant on Sept. 23 as it continues to find a fix for a faulty electronic door handle mechanism that can cause the doors to swing open unexpectedly, even while driving.
According to the National Highway Traffic Safety Administration (NHTSA), the problem that triggered the recall stems from water seeping into the circuit board of the electronic door handles. This can cause a short circuit, allowing the doors to open while the car is moving.
The recall affects 98,806 vehicles from the 2021-2024 model years, and the automaker has also issued a stop-sale for unsold and pre-owned inventory vehicles. VW has not found a fix for the issue and said it will temporarily stop ID.4 production at its Chattanooga factory until a repair is available.
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VW workers face the threat of furloughs
While the automaker halts production of the ID.4 to find a fix, 200 Chattanooga workers will be furloughed starting on September 23.
In a statement to Automotive News, Volkswagen said it plans to support its furloughed workers by supplementing Tennessee state unemployment payments to still receive 80% of their base compensation, as well as keeping them eligible for their current benefits.
According to ADP, "Furloughed individuals are still considered employees and usually resume their jobs at a later point, while those who are laid off are separated from their employer indefinitely."
Nonetheless, the 200 Volkswagen workers are expected to spend significant time away from the production line. VW U.S. sales head Andrew Savvas told AutoNews that it aims to have a remedy for the door handle issue by the start of 2025.
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The news of the furloughs comes conveniently at the same time that Volkswagen and the United Auto Workers are expected to begin negotiating a contract.
In a statement seen by the Chattanooga Times Free Press, United Auto Workers Vice President Chuck Browning said that Volkswagen management notified the union of its plans to furlough its workers.
"Due to the power of our union, we were able to secure layoff pay for every worker affected by this move, a benefit UAW members at the Big Three have had for many years," Browning said.
In July, VW hired former General Motors contract negotiator Christena Wilson to lead contract negotiations. In a statement, Volkswagen expressed that it is committed to listening to its employees throughout the process.
"We will work tirelessly and collaboratively to reach a fair agreement that takes into account the unique nature of our single U.S. plant, our employees, and the Chattanooga community," VW said. "This will ensure a strong and successful future for Volkswagen Chattanooga with the UAW."
Contract negotiations are currently underway between the UAW and VW,
TheStreet has reached out to Volkswagen for comment.
Volkswagen AG, which trades as VLKAF on OTC markets, is down 2.56% at the time of writing, trading at $108.85 per share.
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