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Cablegate: New Leadership at Volkswagen Union

VZCZCXRO7698
RR RUEHCD RUEHGA RUEHGD RUEHHA RUEHHO RUEHMC RUEHNG RUEHNL RUEHQU
RUEHRD RUEHRS RUEHTM RUEHVC
DE RUEHME #0302/01 0321914
ZNR UUUUU ZZH
R 011914Z FEB 08
FM AMEMBASSY MEXICO
TO RUEHRL/AMEMBASSY BERLIN 0410
RUEHOT/AMEMBASSY OTTAWA 2360
RUEHC/SECSTATE WASHDC 0386
RUEHC/DEPT OF LABOR WASHDC
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAHLA/DEPT OF HOMELAND SECURITY
RUEATRS/DEPT OF TREASURY WASHDC
RHMFIUU/CDR USSOUTHCOM MIAMI FL

UNCLAS SECTION 01 OF 03 MEXICO 000302

SIPDIS

SIPDIS

DEPT FOR DRL/AWH AND ILCSR AND WHA/MEX, DOL FOR ILAB

E.O. 12958: N/A
TAGS: ELAB ECON PROV PHUM EIND PINR MX
SUBJECT: NEW LEADERSHIP AT VOLKSWAGEN UNION

REF: 07 MEXICO 5935

1. SUMMARY: In early January a new leadership team took
formal control of the union at the Volkswagen automobile
assembly plant in the central Mexican state of Puebla. The
Puebla Volkswagen plant employs approximately 11,000 workers
and is one of, if not the, single largest employers in the
state. The Volkswagen auto workers union does not belong to
any of Mexico,s traditional national labor federations and
is instead affiliated with the National Workers Union (UNT)
which has very close ties to the PRD, the country,s main
opposition political party. During the campaign the group
which eventually won the union,s election held late 2007 had
considered leaving the UNT which would have had a significant
negative impact on that national labor federation and by
extension on the PRD. Because of the size and importance of
the union many feared the possibility of violence as the
competition for union control intensified. In the end,
perhaps because of a significant police presence by state
authorities, the union election and ultimate transfer of
power took place peacefully. The main issue in this election
was a struggle between an established union leadership
perceived as being overly concerned with its own pay and
perks, and a newer group of union leaders willing to
challenge management on issues such as major changes in work
rules that could affect productivity. End SUMMARY.


OUT WITH THE OLD
----------------

2. During the last weeks of 2007 the Independent Automobile
Workers Union of Volkswagen of Mexico (SITIAVW) in the
central Mexican state of Puebla held internal elections to
choose a new leader and a new executive committee. The
winner of the election and his leadership team will serve a
four year term of office. The Volkswagen assembly plant in
Puebla employs about 11,000 workers of whom some 9,500 are
unionized. Volkswagen is one of, if not the, single largest
employers in Puebla and its impact on the state,s economy is
considerable. In addition to the potential economic affects
of the outcome of the SITIAVW election, the ballot vote also
had significant implications for both the state of Puebla and
for organized labor in Mexico at the national level.

3. The SITIAVW is affiliated with the second largest labor
federation in Mexico, the National Workers Union (UNT).
Unlike many older and more traditional labor federations in
Mexico, the UNT has no formal ties to any particular
political party and describes itself as an &independent8
labor organization. However, informally, the UNT is closely
linked to Mexico,s main opposition party, the Party of the
Democratic Revolution (PRD). Control of the SITIAVW is an
important source of strength for the UNT and by extension for
the PRD. During the campaign leading up to the election, one
of the leading groups contending for control of the SITIAVW
indicated that if elected it might well withdraw the union
from the UNT.

4. As in other parts of Mexico, politicians in Puebla often
campaign on topics related to job creation and or job
retention. Anything that potentially touches on employment
issues, particularly with regard to one of the state,s
largest employers, is closely watched by the authorities.
Consequently, the state government of Puebla, which is
controlled by Mexico,s former ruling party, the
Institutional Revolutionary Party (PRI), was particularly
vigilant in monitoring, and ultimately policing the SITIAVW
election both for economic and political reasons. With
regard to economic reasons, Puebla,s government wanted to be
prepared for a possible change in the business environment if
control of the union changed to a group intent on being more
confrontational with Volkswagen management. In political
terms, the authorities wanted to be ready to take advantage
of a change in leadership that might leave the UNT and
thereby sever union,s ties with Mexico,s main opposition
party.


IN WITH THE NEW

MEXICO 00000302 002 OF 003


---------------

5. At the height of the SITIAVW election there were eight
different factions vying for control of the union but in the
end only two of these groups had any real chance of winning.
The two main contenders were named &21st Century Labor
Justice8 headed by Jose Luis Rodriguez Salazar and &Union
Power8 led by Victor Jaime Cervantes Rosas. This was the
second time these two power group competed for control of the
SITIAVW. In the previous election in 2003, the group lead by
Rodriguez Salazar defeated Cervantes Rosas, Union Power
group by winning 20 percent, as compared to 11 percent of the
vote. That 2003 victory was the second win for Rodriguez
Salazar, thereby allowing him to serve as the SITIAVW,s
Secretary General for a total of eight years. Rodriguez

SIPDIS
Salazar and his group had hoped to win a third four year term
of office but it was not to be. In the 2007 vote Cervantes
Rosas, group defeated Rodrigues Salazar,s with 34 percent
of the vote compared to 15 percent of the vote.

6. The main focus of this last election appears to have been
a struggle between the established union leadership that had
clearly benefited directly from its eight years in power and
a challenger prepared to take on management more
aggressively. The challengers, Cervantes Rosas, Union Power
group, made a great deal of the fact that while Rodriguez
Salazar started out as just a senior worker he had now moved
to an upscale house, been featured on CNN as one of the ten
most powerful labor leaders in Mexico and had been invited to
serve as a PRD opposition party city councilman in the PRI
dominated administration of Puebla,s state capital.

7. Fairly or not, Rodriguez Salazar,s group was blamed for
the fact that total employment at the Volkswagen plant had
dropped from 15,000 to 11,000 jobs during the eight years
that &21st Century Labor Justice8 had control of the union.
The clear message of the ultimately successful campaign of
Cervantes Rosas, group was that the Rodriguez Salazar was
more interested in the pay, perks and politics that
leadership of the union gave him than he was in the welfare
of the workers. With such a sharp focus on how well
Rodriguez Salazar had personally done by serving as SITIAVW
leader, the authorities in Puebla feared the possibility of
violence as the competition between the two leading groups
intensified. Consequently, state law enforcement and labor
authorities took steps to closely monitor the entire election
process and to deploy a substantial police presence at
polling places well in advance of actual voting. In the end,
the election took place without violence and without any
significant public disturbances with a large margin of
victory won by Victor Jaime Cervantes Rosas and his &Union
Power8 groups.


SITIAVW,S NEW UNION LEADERSHIP HIGHLIHTS ITS POSITIONS
--------------------------------------------- ---------

8. &Union Power8 group led by Cervantes Rosas is composed
of a team of 42 workers who represent the eight different
industrial divisions at the Volkswagen plant in Puebla.
Although the winning Union Power group focused the majority
of its campaign efforts underscoring how much Rodriguez
Salazar and his group had directly benefited from their years
of union leadership, they highlighted two other themes during
the course of their electoral campaign. One of these themes
was openly political and the other more specifically related
to the production operations of Volkswagen,s Puebla facility
and management,s plans to change current work rules.

9. In discussing political plans, the Union Power group
repeatedly stated its intention to review SITIAVW,s long
standing affiliation with the UNT to consider whether the
time had come to withdraw from this national level labor
federation because it did not see any clear advantage to
being associated with this national federation. Specifically
being part of the UNT did not get SITIAVW members anything
they would not have gotten on their own. At several points
during the campaign Cervantes Rosas pointedly refused to rule
out the possibility that the SITIAVW might join one of
Mexico,s other national level labor federation. In order to
retain the SITIAVW within the UNT,s ranks its national
leader, Francisco Hernandez Juarez, personally lobbied

MEXICO 00000302 003 OF 003


Cervantes Rosas, urging him not to take the Volkswagen
autoworkers union out of the national labor federation. In
the end, Cervantes Rosas agreed to remain in the UNT for an
additional year at the end of which the SITIAVW would review
its relations with the national federation and make a
definitive decision at that time.

10. The other prominent theme of Union Powers, campaign was
its complete rejection of Volkswagen,s management,s plan to
implement what the union groups saw as a significant change
in work rules. According to the Union Power group, Volkswagen
management wants to institute a policy of greater labor
flexibility. From Union Powers, perspective this increased
flexibility is viewed as a way to increase the amount of work
employees are required to do without any meaningful increases
in salary. Volkswagen,s management,s position is that the
increased labor flexibility is simply an expansion of what is
already being done in some division of the company,s Puebla
operations. This change in work rule flexibility would
provide significant cross training to Volkswagen employees as
a way of increasing their productivity. Post notes that
changes Volkswagen wishes to expand upon are already being
implemented in at least two of the three Ford assembly plants
in Mexico (Reftel) and that Ford copied these work rule
changes from several Japanese auto manufacturers as a way to
boost not only productivity but also competitiveness.

11. The Union Power faction has publicly stated its wish to
have a productive relationship with Volkswagen management but
indicated that such a relationship must be based on mutual
respect. The new union leadership says it is prepared to
negotiate with Volkswagen on any other subject, except change
in work rule flexibility. The new union leadership says,
although with presenting any evidence to support its
assertion, that labor costs in Mexico are already the lowest
at any of Volkwagen,s operations worldwide and it sees no
reason to take steps (like work rule flexibility) that would
further reduce costs without greater compensation for
workers. Interestingly Cervantes Rosas has indicated to the
press that the union will not seek any substantial increase
in worker compensation at his time nor in the immediate
future.


COMMENT
-------

12. The change in leadership of the Volkswagen autoworkers
union offered a demonstration of something that is rare in
Mexican labor politics -- namely workers democratically
choosing who will represent them. The leadership group that
lost the election gracefully accepted its defeat and
efficiently handed over power to its successor. The PRI
controlled state government of Puebla, which has a reputation
for often seeking to obtain a partisan advantage, remained
neutral during the electoral process. This neutrality
reqiired notable restraint on the part of the state
authorities given that the faction that won the election had
signaled a willingness to at least consider changing the
union,s labor and political affiliation. At the national
level, the UNT lobbied hard to hold on to the SITIAVW union
and for the moment it appears this PRD linked labor
federation was successful. Now that the new SITIAVW has
taken office it remains to be seen what type of relationship
it will establish with company management and what
compromises it will make to help Volkswagen follow American
and Japanese automakers practices that have proven effective
in increasing productivity.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
GARZA

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