By SEAN HIGGINS, INVESTOR'S BUSINESS DAILY
Posted 03/02/2012 07:02 PM ET
Volkswagen Passats roll down the assembly line in Chattanooga on July 1, 2011. Tennessee has mostly been spared the trauma of mass layoffs, closures... View Enlarged Image
NASHVILLE, Tenn. — President Obama triumphantly told the United Auto Workers last month that car manufacturing in America is back, thanks to the federal GM (GM) and Chrysler bailouts. In Tennessee, the reaction was: Don't call it a comeback — we've been here for years.
Michigan may be Motor City's home in most people's minds, but Tennessee has emerged as another major hub of auto manufacturing and related industries. Big domestic and foreign automakers have several facilities here and are expanding rapidly.
Tennessee, one of many Super Tuesday GOP primary states, has mostly been spared the trauma of mass layoffs, closures and bailouts that plagued the Rust Belt. Business and free-market groups cite a key advantage: It is a right-to-work state, effectively preventing Big Labor from being a major player there.
Right-to-work laws mean that employees cannot be forced to join a company's union or pay dues to it as condition of employment. A total of 23 states have passed such laws. Tennessee was among the first in 1947.
The state "just doesn't have a union culture," said Deb Woolley, president of the Tennessee Chamber of Commerce.
Tennessee has been a magnet for new businesses, including foreign investment. Nissan (NSANY) moved its U.S. headquarters to north of Nashville in the mid-2000s. It just added 1,000 jobs to its Smyrna plant, which opened in 1983. Nissan has plans to add 1,300 in 2013 for a total of about 6,000.
Toyota (TM) has a parts facility in Jackson. Volkswagen (VLKAY) opened its only U.S. plant in Chattanooga in 2010. "We have 2,500 employees and have plans to hire 200 more," said plant spokesman Guenther Scherelis.
Tire giant Bridgestone's American HQ is in Nashville, and its seven-state facilities employ 3,800. GM plans to retrofit and reopen an old Saturn plant in Spring Hill to handle overflow production needs from Michigan.
Companies cite a variety of benefits. "The business climate here is very good," said Bridgestone spokesman Dan MacDonald. "Nashville is also centrally located and there is an excellent labor force in Middle Tennessee."
All told, the state's various auto-related firms employ an estimated 110,000 people.
Right To Remain Silent
Few belong to the UAW. Total UAW numbers couldn't be obtained, but the AFL-CIO, the labor coalition that includes the auto union, has only 60,000 members in the entire state.
Businesses almost never cite right-to-work laws as a reason for locating. Scherelis said it wasn't a factor for VW. MacDonald noted that Bridgestone's two main plants are unionized.
But companies have a reason to avoid the subject: They court political pressure or worse if they don't.
Last year, Boeing (BA) expanded its operations to South Carolina, another right-to-work state. A single comment by one executive that past strikes played a role in that decision resulted in a major complaint from the National Labor Relations Board that Boeing was retaliating against the machinists union. Boeing later settled the case with its union.
Tennessee's law has held down labor costs. VW pays $27 an hour for new employees in wages and benefits, about half of the $52 an hour labor cost in Detroit. When the unionized GM agreed to reopen the Spring Hill plant last year, it forced the UAW to accept a starting wage of $15.78.
"Even if a plant is unionized (in a right-to-work state), the unions have a major incentive to increase productivity," said Pat Semmens, spokesman for the National Right to Work Legal Defense Fund. It also gives firms flexibility in work rules and running operations.
Critics cite the lower wages as proof that the laws hurt workers. But locals say that's offset by lower living expenses. Nashville's cost of living is 11% below the U.S. average, the Census Bureau reports. Detroit's is only 1% below.
Tennessee isn't immune to the auto industry's ups and downs, but seems to weather them well.
"We got through the recession without major layoffs," Woolley said. "There were a lot of curtailments and furloughs (for workers), a lot of short workweeks, but now we are back at full speed."
There isn't much resentment toward Detroit and the attention it received. GM's return to Tennessee has muted criticism, locals say. Most people are glad the industry overall is making a comeback.
"It's not really an issue here," said state GOP Rep. Bill Dunn.
State auto workers have not shown much interest in unions. Nissan's Tennessee plant workers rejected joining the UAW by roughly 2-1 in 1989 and 2001.
The UAW last year said it would push to unionize a foreign carmaker's U.S. plant, but dropped the effort last December.
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