Indiana turns right-to-work, move could impact Tennessee auto industry
Decision about North American Audi plant expected by summer, source says it's not Chattanooga
Indiana has become a right-to-work state, and the implications of that recent move could stretch south to Tennessee.
“You do have a Northern state with an installed base of manufacturing and suppliers—all that is already there,” Bill Visnic, Edmunds.com senior analyst, said. “Now—at least in a certain new political angle—[Indiana] is competitive with the South.”
On Feb. 1, Indiana Gov. Mitch Daniels signed a bill that prevents union contracts from requiring nonunion members to pay fees for representation, according to The New York Times.
The legislation makes Indiana the first Midwestern manufacturing state to have such a law.
Indiana is also the first state in more than a decade to create right-to-work legislation, according to The New York Times.
When leaders in manufacturing are looking to locate in a new state, right-to-work states have traditionally had some advantage because unions are more difficult to establish there.
The United Auto Workers have struggled to organize Southern right-to-work states.
“One of the reasons why a lot of car companies have located [in right-to-work states] is they didn’t want union entanglement—at least in theory,” Visnic said. “I don’t know if it would be something that would be the No. 1 reason to move to Indiana, but it does add another selling point.”
On the other hand, Visnic said, there isn’t a large difference between UAW wages and wages offered at Southern, nonunion manufacturing plants, such as Volkswagen.
Last month, VW spokesman Guenther Scherelis said that the company’s pay for beginners is $14.50 an hour.
Workers in Spring Hill and other unionized plants start out at $15.78, according to the most recent UAW agreement.
After four years, those union employees make $19.28 an hour.
After three years at Volkswagen, employees make $19.50 an hour, Scherelis said.
Audi speculation
Automotive News reported last week that Volkswagen AG leaders plan to make a decision about where to locate a new North American Audi plant by the summer.
Many news reports have speculated that Chattanooga would be a natural fit for the Volkswagen-owned Audi to locate.
The local plant has room for expansion. Volkswagen has an option on about 1,000 acres at the Enterprise South location.
At Volkswagen’s grand opening in May, Volkswagen AG CEO Dr. Martin Winterkorn said Audis "could be" produced in Chattanooga but did not elaborate.
Last month, news reports surfaced that Chattanooga had been eliminated from the list of possible locations for the plant.
News Channel 9 cited auto industry website Autospies.com that Mexico might be a front-runner location for the plant.
An auto industry source told Nooga.com that Volkswagen leaders don’t think Audi will come to Chattanooga.
Although Volkswagen leaders have said that “made in America” is an important statement, the Audi plant could be located in Mexico or Canada, industry insiders said.
Visnic said that the success of Volkswagen Passat sales could affect the decision about Audi's location. He also said there is a case to be made that—from a sales and marketing perspective—it's smart to keep Audi and Volkswagen brands in separate manufacturing locations.
“The plant has the ability ... to double its capacity by creating a mirror plant, effectively a duplicate [of the current plant],” Visnic said. “I believe it’s Volkswagen’s assumption, based on their sales trajectory in the past two years, that they will have the need for the capacity themselves.”
