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A Volkswagen executive said the company's Chattanooga, Tenn., plant will likely build an all new crossover SUV for the company, even as conservative politicians bash the automaker for inviting the UAW to organize workers at the plant.

Marc Trahan, executive vice president of quality for Volkswagen in the U.S. said at an Automotive Press Association luncheon on Tuesday that Volkswagen will decide by the end of this year where to build the seven-passenger SUV, which the company believes it needs in the U.S. market. Trahan said the decision will be based on cost.

"Right now I'd have to say Chattanooga's in the lead," over factories in Mexico, he said.

Over objections from Republican Tennessee lawmakers, including the Governor and both U.S. Senators, Volkswagen is trying to create a similar arrangement with workers at the Chattanooga plant as it has at most of its plants around the world. It's known as a Works Council, which acts collaboratively with management while at the same time representing worker rights. German companies like VW and Daimler-Benz even have a Works Council member on their supervisory boards as well -- unheard of in the U.S.

A letter from Frank Fisher, the chief executive officer of the VW plant, sent to employees earlier this month is the boldest support of a foreign-owned automakers recognizing a union workforce in the U.S. to date.

"In the U.S., a Works Council can only be realized together with a trade union," read the letter signed by Fischer. "This is the reason why Volkswagen has started a dialogue with the UAW in order to check the possibility of implementing an innovative model of employee representation for all employees."

Past Organizing Attempts Hit A Wall

Attempts to organize workers at plants in the U.S. owned by Toyota, Honda, Nissan, Mercedes-Benz have all failed. Those companies' U.S. plants are mostly in right-to-work states -- such as Tennessee -- which allows workers to hold a job at a plant without joining a union if he or she doesn't want to. Management at those plants have in the past waged whisper campaigns in some cases to let workers know they would consider closing a factory if they organized it.

The move by VW to essentially invite the UAW into its plant is not playing well with Republican politicians who vigorously oppose labor unions, especially Republican Tennessee Governor Bill Haslam. "I've had several folks recently say that if the UAW comes, that would dampen our enthusiasm for Tennessee," he told the Chattanooga Times Free Press. "They feel like, 'We're looking at Tennessee because it's a right-to-work state.'"

For VW, though, working with unions is the norm and what the company is comfortable with. The company has about 100 plants worldwide, and all of them except for the Chattanooga factory and the company's six joint-venture plants in China have such a council.

The UAW, whose membership has dwindled in the last 20 years, has gotten a bad reputation, some of it earned, especially during the bankruptcies of General Motors and Chrysler. The union, for example, had long negotiated safety nets for laid off workers, called jobs banks, which paid workers who didn't have jobs to go to. The union also has had a higher absentee rate than other worker groups. Their healthcare benefits were especially burdensome to the automakers, and the union was owed so much money for future healthcare at the time of bankruptcy that its healthcare trust currently owns large stakes in GM and Chrysler, which the union plans to sell at some point to pay for their members' health care expenses.

Republicans are especially belligerent toward labor unions, and the UAW specifically, because historically it spends millions of dollars a year supporting and organizing members around Democratic candidates.

Weakened Unions Have Wind At Their Back

Labor unions have been weakened in large part because companies have moved manufacturing in the U.S. offshore to Mexico, China and Latin America where hourly wages and healthcare costs are much lower, or where healthcare is provided nationally.

But because of UAW concessions, the gap between the union's wages and those of Toyota's, for example, in the U.S. is closing. By 2015, GM's total cost for wages and benefits will be about $59 an hour, compared with $56 at Toyota. Chrysler's average hourly labor costs will be $53.

When VW opened its plant in 2011 it set a record for low wages among auto workers, paying its entire production workforce the lowest starting wage for new U.S. autoworkers -- $14.50 per hour. That wage, though, is high for hourly work in the Chattanooga area. Volkswagen received over 35,000 applications for its initial hiring batch of 1,500 employees.

VW's Works Council in Germany, which didn't like the ultra-low wage in Chattanooga, has told the company that it will not support or consent to an expansion VW would like to do at Chattanooga unless the workers are represented. VW officials say they would like to make a decision about building a new SUV at the plant, or in Mexico, by the end of this year.

What form a U.S. Works Council would take, and how close it would be to the European model or a more traditional UAW union shop, is still open for discussion and debate among workers and the union. Gary Chaison, a professor of labor relations at Clark University in Worcester, Mass., said it would take "tremendous flexibility" for the UAW to agree to a works council that falls short of traditional collective bargaining.

"Some people will see this as unions getting a foot in the door and asking for more," he said.

The open discussions are significant. With such a start, and VW's cooperation from the get-go, it is unlikely that some kind of organization of the workers who are building VW Passat sedans and eventually an SUV, will not be organized in some way.

Workers at auto supplier companies in Tennessee, as well as other right-to-work states and industries that have so far held off UAW-style organizing, will watch closely to see if a 21st century labor organizing model can work. Restaurant workers, which recently staged a walk-out in several states, are looking for a new labor organizing model.

The Associated Press contributed to this report.


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