Executives of German auto supplier Benteler Automotive, Battle Creek aircraft maintenance hub Duncan Aviation and Denso Corp., a Japanese-owned supplier to VW, praised Michigan workers. “Two of those three have operations in both Michigan and the South, and they told them the workforce is much better here, no comparison,” recalls Jim Hettinger, president and CEO of Battle Creek Unlimited, the local economic development agency.

At the same time, however, a nasty labor strike was raging at American Axle & Manufacturing plants in the cities of Detroit and Three Rivers, not far down the road on either side of Marshall. Newspaper headlines about the American Axle strike—when the Project Polar Bear team was in Michigan—were undermining the state’s best efforts to land the VW plant.

Hettinger, a highly respected business recruiter who talked Denso and 14 other Japanese companies into settling in Battle Creek during the 1980s, said the courting of the VW plant was an uphill battle from the get-go. “I don’t think VW would have looked at Michigan if she hadn’t been relentless in pursuing them,” Hettinger said of Gov. Jennifer Granholm.

Indeed, a Michigan Economic Development Corp. memo that outlines the state’s courtship of Project Polar Bear suggests Michigan wasn’t a contender when VW started scouting for sites last fall.

Persistence rewarded

Only after MEDC staff pestered VW and Granholm met Feb. 19 at the Westin Hotel at Detroit Metro Airport with Dr. Christof Spathelf, VW’s head of group manufacturing overseas, was Michigan included among the serious bidders, along with Virginia, Alabama, South Carolina, Tennessee, Georgia and Louisiana.

The MEDC memo indicates that in March, the Michigan team believed it was making good progress convincing VW and the Dallas-based Staubach Co., VW’s site consultant, that the skills of Michigan workers were superior and that wage rates in the Marshall area were the same as or lower than those in competing states. On April 24, Michigan was notified it was one of three finalists.

But there was still a major hurdle. “It was clear that the client was concerned about locating in Michigan due to the existing auto industry and labor climate. Each time we met with” VW “and Staubach, we believed we were overcoming some of those preconceptions,” the MEDC memo stated.

When the top-level VW and Staubach teams came to Michigan for the crucial pitch in May at the Yarrow resort, their worst fears about Michigan’s reputation for adversarial labor relations were splattered in headlines across Detroit’s newspapers and USA Today:

“Local UAW strike hits GM’s popular Chevy Malibu,” May 6.

“UAW Turns Up the Heat,” May 7

“Axle Union Reps Leave Talks,” May 8.

Granholm, recuperating from surgery a week before the Yarrow gathering, wasn’t able to attend.

She tried later to arrange another meeting with VW’s Spathelf, but by that time Michigan’s chances were fading. Granholm received a call from VW on July 3 to tell her Michigan was out of the running. On July 15, VW announced its decision to award Project Polar Bear to Tennessee.

Labor unrest feared

“Fear of the UAW probably drove the final decision,” Hettinger told me last week.

Others familiar with the negotiations agreed with his assessment, although MEDC officials said they were never given a specific reason for Tennessee’s selection.

While some people in Michigan are quick to blame the UAW and other labor unions for all of the state’s economic ills, others—especially in the Democratic Party—tend to dance around the topic. Labor has been politically powerful in Michigan for generations, and the UAW is deeply embedded in the state’s fabric, not only in auto plants but in offices, casinos and on the boards of hospitals and charitable groups.

Those who follow the auto industry closely know that UAW President Ron Gettelfinger led the union through a series of landmark negotiations last year, making major concessions in wages, benefits and shop floor flexibility that will allow Detroit’s three automakers to be more competitive with foreign rivals. The same Ron Gettelfinger, though, used angry rhetoric to demonize Steve Miller and Dick Dauch, the chairmen of Delphi Corp. and American Axle, respectively, when UAW bargaining stalled at those firms.

My point here isn’t to blame only the UAW for Michigan’s reputation as a hostile labor environment. CEOs who receive and dole out huge bonuses to executives while demanding wage and benefit cuts from rank-and-file workers need to understand the anger those actions provoke.

My point is that Michigan still suffers from a widespread perception that the state has a rotten labor climate—in an era where talent, productivity and labor harmony trump all other criteria about where to locate and grow a business.

The badmouthing, the finger-pointing, the strikes, the slowdowns ... It all has to stop.

Period.

The past 30 years of decline for Michigan’s auto industry and its chief labor union should have made it abundantly clear by now. If we keep doing the same dumb stuff, we will get the same dumb results.

To tweak a famous saying from President Bill Clinton’s campaign guru James Carville, “It’s the labor climate, stupid.”

Contact TOM WALSH at 313-223-4430 or .