UPDATE, Feb. 14, 10 p.m.: Factory workers have voted against union representation at Volkswagen AG’s sole U.S. manufacturing plant in Chattanooga, Tenn. Results annouced late Friday: 712 against unionization and 626 in favor.

UPDATE, Thursday, 11 a.m.: Volkswagen issued the following statement Thursday: "There is no connection between out Chattanooga employees' decision about whether to be represented by a union and the decision about where to build a new product for the U.S. market." 

The German automaker was responding to Sen. Bob Corker (R.-Tenn.) who said Wednesday night that Volkswagen would annouce that it would build a new mid-sized SUV (a crossover) in Chattanooga if workers at VW's sole U.S. factory voted against UAW union representation. 

UPDATE, Wednesday, 8 p.m.: Tennessee's Republican Sen. Bob Corker issued a statement Wednesday evening: “I’ve had conversations today and based on those am assured that should the workers vote against the UAW, Volkswagen will announce in the coming weeks that it will manufacture its new mid-size SUV here in Chattanooga.”

Volkswagen is currently deciding whether to build a new crossover for the North American market in Tennesee or in the state of Puebla, Mexico. As mayor of Chattanooga from 2001 to 2005, Corker, who opposes unionization, was instrumental in establishing the industrial park where Volkswagen's only U.S. manufacturing plant is located. 

Original story begins here: 

More than 3,200 factory workers at Volkswagen’s 1,400-acre factory in Chattanooga, Tenn., will begin voting Wednesday on whether or not to establish the first German-style on-site works council in the United States.

The stakes are high for the United Auto Workers, which represents nearly a million current and retired U.S. workers but has failed to make inroads into U.S. plants operated by foreign automakers. The union sees this week’s vote at the billion-dollar factory owned by the world’s second-largest automaker as its best opportunity to, in the words of UAW President Bob King, “set a new standard in the U.S. for innovative labor-management relations.” It would also be the first successful attempt by the UAW to gain a foothold in a foreign-owned automotive plant.

The vote is not just a litmus test for whether Tennessee workers of a major multinational company embrace (or don’t) collective bargaining in the American South, where private-sector union clout is significantly weaker than in other parts of the country. It’s also an important test shot by the UAW to see if it can adopt a bit more of a German approach.

Volkswagen AG (FRA:VOW), which develops cars and components and sells passenger and commercial vehicles worldwide, employs more than a half-million workers, but only three of its factories (the one in the U.S. and two in China) lack employee work councils. These employee-elected councils negotiate with local management on day-to-day issues, such as vacation time.

It’s a German way of dealing with the natural (and sometimes historically bloody) frictions that arise between the suppliers of jobs and the suppliers of labor. Near the top of Volkswagen’s corporate pyramid, the company has a 20-member supervisory board, of which 10 members are elected by shareholders and 10 are picked by employees. Three of the employee-elected members represent unions. Currently sitting on that board is Berthhold Huber, a top secretary of IG Metall, Germany’s powerful version of the UAW.

If the vote passes, the UAW will hail it as a major breakthrough in building a new model for trade unionism. The UAW would retain the power to negotiate wages and benefits, but it would cede control over negotiating other issues, such as plant rules, work hours, vacation time and training. It’s that relinquishing of control over the day-to-day details that would alter the way the UAW operates inside a company, and the UAW hopes the work council model could become the architecture for a 21st century American union.

It would be a step further than the UAW’s already evolving relationship with automakers. In recent years, the union has developed what it says is a more collaborative relationship with U.S. automakers General Motors Co. (NYSE:GM), Ford Motors Co. (NYSE:F) and Chrysler Group LLC, recognizing the realities of globalization that have forced unions to accept some bitter-pill realities in the liberalization of the global marketplace.

One example was the compromise between Chrysler and the UAW Retiree Medical Benefits Trust that allowed Fiat SpA (BIT:F) to take full control of Chrysler in a $3.65 billion deal announced on Jan. 1. The trust agreed to take less than the estimated value of its stake of $4.15 billion. The compromise came after the trust threatened to require Fiat to list a part of Chrysler on the stock exchange, a right the union retained during the rescue of Chrysler in 2009 and something Fiat CEO Sergio Marchionne was loath to do before gaining full control of the company.

The UAW has been more flexible on wage negotiations, too. In 2011 the Detroit automakers won wage and benefit deals that increased hourly and labor costs less than 1 percent per year over four years in light of stiff competition from foreign automakers, many of whom have set up shop in the South and have successfully kept unions out.

Volkswagen has stated numerous times it is remaining neutral in the vote, but the National Right to Work Legal Defense Foundation, an anti-union group founded in 1968 that strongly opposes compulsory union dues, has accused Volkswagen and the UAW of “backroom deals … giving union organizers preferential access to the workers leading up to the election.”

The accusations come after the UAW said last fall a majority of plant workers signed cards in support of unionization. This would normally be enough to form a union in a controversial process known as “card check” that critics say can lead to coercion from pro-union co-workers who would know which workers refused to sign cards in support of union representation.

A law signed by Tennessee Gov. Bill Haslam in June 2011 requires secret workplace ballots, which could have pitted the state against the federal National Labor Relations Board. But in this case the UAW and Volkswagen agreed to a secret ballot to avoid any further controversy. The NRLB will oversee the vote.

The National Right to Work Legal Defense Foundation isn’t the only one pushing back against efforts to create union representation at the plant. Conservative activist groups, lawmakers and the local media have stepped up their anti-union campaigns.

The Center for Worker Freedom, an anti-union group run by anti-tax activist Grover Norquist, has peppered Chattanooga with billboards blaming the UAW for Detroit’s dire financial situation and underscoring the union’s support of liberal politicians.

The state’s Republican lawmakers have joined the chorus by lashing out at Volkswagen itself.

State Sen. Bo Watson, R-Chattanooga, told the Tennessee Free Press in a report published Monday that if the plant becomes unionized, “I believe additional incentives for expansion will have a very tough time passing the Tennessee Senate.”

Tennessee lured the German automaker in 2008 with $500 million in government assistance and tax breaks in 2008.

Volkswagen has said it plans to expand either the Chattanooga plant or the one it maintains in the Mexican state of Puebla for future SUV production as part of $7 billion in North American investments by 2018.