The move adds a new twist to long-running drama over whether VW's plant will be organized by the United Auto Workers, since the company had previously hinted that unionization was a necessary step before any expansion.
Instead, Chattanooga workers rejected the UAW in a 712-626 vote in February, and now VW officials have decided to move ahead anyway. The decision takes away one of the major tools the union had to persuade plant workers to join.
"The Chattanooga-built midsize SUV will allow us to fulfill the wishes of our dealer network, bringing new customers to our showrooms and additional growth for the brand," said Michael Horn, President and CEO Volkswagen Group of America. The company says it will invest $600 million and create 2,000 jobs in the expansion.
Nevertheless, the struggle to unionize the plant is far from over. VW also announced that Bernd Osterloh will join the board of directors for Volkswagen Group of America, Inc. Osterloh is the head of the German automaker's labor-management global works council, which has considerable sway over company decisions and pushed for a union in Chattanooga.
"We are pleased that Mr. Osterloh has declared his willingness to play a concentrated role in shaping our US strategy in the future. He will represent the views of the workforce. This is in line with the codetermination culture of Volkswagen, which is one of our key success factors," said VW Chairman Martin Winterkorn.
Last week, UAW announced it was creating a union local in Chattanooga and offering voluntary membership to plant workers. The union hopes to eventually get the bare majority needed to petition VW to recognize it as the workers' exclusive representative.
It is not clear how solidly VW executives are behind having a union, though. They may simply be trying to keep the peace with their German workers union, IG Metall, while still going ahead with the expansion.
VW's announcement was made a press conference in Wolfsburg, Germany, that included presentations from Sen. Bob Corker, R-Tenn., and Gov. Bill Haslam, both of whom had been staunch opponents of unionizing the plant. No UAW officials spoke at the event.
"I am very grateful that I had a role in seeing this through to today's conclusion," said Corker. "It is an investment you will be proud that you made," he told the VW executives.
Though VW had longed showed an interest in expanding the plant, it was not clear whether it would or could after the February vote. Last year, Osterloh indicated that the plant must first have European-style "works council" -- a board of company and worker representatives.
U.S. labor law is widely-believed to prohibit such entities if the workers do not already have a union. Otherwise, the council would in effect be a company-backed union and therefore have an inherent conflict of interest.
So Osterloh, himself a former union leader and also a member of VW's supervisory board, was in effect saying that the plant workers had to be organized.
He told the AP as much in November: "It's important to note that the issue for us is works councils, not unions. And your law says if I want to transfer authority to a works council, I need to work with a union."
That created an opportunity for UAW. VW even tacitly backed the Detroit-based union's bid, requiring employees to attend mandatory meetings to hear from union organizers while barring anti-UAW groups from the plant. UAW had high hopes the plant would give it a foothold in the union-averse south.
The workers said "no thanks" instead. Osterloh said afterwards the company may not be allowed build another plant in the southern U.S. states again. "If co-determination isn't guaranteed in the first place, we as workers will hardly be able to vote in favor," he told Reuters.
UAW filed a complaint with the National Labor Relations Board seeking to void the election. It claimed that comments by Corker during the three-day February vote tainted the outcome. The senator had claimed -- citing unnamed inside sources -- that VW would expand the plant if the workers rejected the union. VW officials countered that the outcome of the vote would have no impact on their decision.
The union withdrew the complaint after Corker refused to testify at an NLRB hearing. Monday's announcement counted as a kind of vindication for Corker.
Ironically, UAW had initially opposed allowing the Chattanooga workers to vote at all, saying the company should simply accept its claim that had gotten a majority of workers to sign cards backing the union. Some workers alleged fraud during this card check election. An NLRB probe found some evidence of this, but declined to sanction UAW.
Rejecting the call for a card-check election showed that VW officials have been ambivalent at best about having a union.