VW’s latest move could compromise the UAW’s goodwill

This week, Volkswagen (VLKAF) and the United Auto Workers are set to negotiate a contract after an overwhelming majority of workers at the Volkswagen plant in Chattanooga, Tennessee voted to allow the United Auto Workers (UAW) to represent the nearly 4,300 workers there in April.

The Chattanooga win is a huge one. It’s a major victory in the otherwise labor-unfriendly American South, and a victory after two failed attempts to unionize in 2014 and 2019. In light of that, the UAW hopes the German automaker’s workers will get their fair share.

Related: Volkswagen braces for UAW labor contract fight

“But here’s what we do know: Volkswagen’s most important market is right here in North America,” UAW President Shawn Fain told a rally. “Their road ahead goes right through Chattanooga, Tennessee.”

However, the talks come as VW also faces labor issues in its home country, and a new development in the United States could put it in a bad spot with the UAW.

A Volkswagen factory employee wipes the hood of a Volkswagen ID.4 at its factory in Chattanooga, Tennessee.

Volkswagen

VW slams the brakes on ID.4 production

Volkswagen is scheduled to suspend production of its ID.4 EV crossover at its 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 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 to 2024 model years, and the automaker has also issued a stop sale for unsold and used inventory vehicles. VW has not found a solution to the problem and said it will temporarily halt production of the ID.4 at its Chattanooga plant until a fix is ​​available.

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VW workers face threat of layoffs

While the automaker halts production of the ID.4 to find a solution, 200 workers in Chattanooga will be laid off starting Sept. 23.

In a statement to Automotive News, Volkswagen said it plans to support its laid-off workers by supplementing Tennessee state unemployment payments to continue receiving 80 percent of their base compensation, as well as keeping them eligible for their current benefits.

According to ADP, “fired individuals are still considered employees and typically resume their jobs at a later time, while those who are laid off are separated from their employer indefinitely.”

However, Volkswagen’s 200 workers are expected to spend a lot of time away from the production line. VW’s head of US sales, Andrew Savvas, told AutoNews that it aims to have a fix for the door handle issue by early 2025.

Related: House approves bill that could cripple U.S. electric vehicle development

News of the layoffs conveniently comes at the same time that Volkswagen and the United Auto Workers are set to begin contract negotiations.

In a statement seen by the Chattanooga Times Free Press, United Auto Workers Vice President Chuck Browning said Volkswagen management has notified the union of its plans to lay off workers.

“Because of the strength of our union, we were able to secure severance payments for every worker affected by this move, a benefit that 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 its commitment to listen to its employees throughout the process.

“We will work tirelessly and collaboratively to reach a fair settlement that takes into account the unique nature of our unique US 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 the OTC markets, was down 2.56% at the time of writing, trading at $108.85 per share.

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