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Union bashers have made much of the United Auto Workers' failure to organize a Volkswagen assembly plant in Chattanooga, Tenn. To hear the conservative commentariat tell it, the defeat (by a margin of 53-47 per cent) underscores how detached Big Labour has become from reality and how shrewd VW workers were to reject a move that would inevitably make the plant less competitive with non-union operations in Mexico.

But the stunning loss says more about rampant job insecurity across the U.S. heartland than it does about any shortcomings of the UAW as it pursues the daunting task of organizing foreign-owned auto transplants in staunchly anti-union southern states.

Political interference was certainly a factor in Tennessee, as the union contends. The heavily Republican state's most influential ideologues threw their considerable weight behind efforts to thwart the unionization drive. They warned darkly that VW would drop plans to expand the facility to produce a new SUV and probably relocate it to a rival state, or Mexico. And other manufacturers would be scared away, too. To top it off, the anti-union forces sketched dire pictures of a bankrupt, crumbling Detroit as Chattanooga's inevitable fate.

This is an outdated view of both organized labour and the state of global manufacturing. The Detroit Three have been closing the productivity and quality gap with Japanese and other foreign manufacturers, thanks to aggressive restructuring, better processes, buyouts of higher-cost older workers and a two-tiered wage structure. All this with the help of a union that used to fight tooth-and-nail against any workplace changes. Of course, it helps when, as in the case of General Motors, you can write off most of your debt. But the UAW's own political clout helped make that happen too.

As for the supposed advantages of staying resolutely out of the UAW's clutches, Mexico already offers cheaper labour than non-union U.S. plants and is grabbing a bigger piece of both the U.S. and Canadian assembly pies. But wages only account for about 10 per cent of costs. And VW and other German car makers have managed to remain extremely competitive even in their high-cost home market, thanks to the creation of efficient research, technology and automotive parts hubs built around assembly plants.

For most car makers, continuing to assemble vehicles in the world's biggest consumer market makes economic sense for a variety of reasons, including proximity to customers, lower shipping expenses, less currency risk, better security and even labour stability. It also makes for good politics when pursuing those fat tax breaks and other government subsidies. Just ask Chrysler Canada.

What makes the Chattanooga organizing failure so striking was that VW itself had signalled its willingness to work with the UAW. Both supported a plan to bring in German-style works councils, giving employees a say in everything from plant operations to hirings and dismissals.

Under U.S. labour rules, this would be easier to implement with a union involved. Unlike North American practice, labour has an official role in the decision-making processes of German companies, including VW. And the UAW made sure it had the company's powerful home union, IG Metall, on side.

Volkswagen stayed officially neutral in the campaign, but took the unusual step of allowing organizers to make their pitches on the plant floor. Yet workers still voted against joining the UAW. The political rhetoric played to their job and wage insecurities, coming out of the worst recession since the 1930s. But so did their pocketbooks.