By Nora Eckert

VANCE, Alabama (Reuters) -U.S. workers at a Mercedes-Benz plant in Alabama handed a stinging loss to the United Auto Workers on Friday, rejecting the union in a vote it had expected would build on a win at a Tennessee Volkswagen plant and push it deeper into the U.S. South.

It marked the first big loss for UAW organizers after a series of victories, including double-digit raises for Detroit workers and the union's expansion to a VW factory in Chattanooga last month. That leaves the next steps unclear for the union, which is in the midst of a $40 million campaign targeting other automakers including Toyota and Tesla.

"It was clearly damaging to the union and other organizing attempts near-term, but it is the beginning, not the end,” said Harley Shaiken, a labor professor at the University California, Berkeley. He blamed worker unfamiliarity with the union and pushback from Mercedes for the loss.

The workers at the plant in Vance, Alabama, and a nearby battery facility voted 2,642 to 2,045 against joining the UAW, meaning 56% voted "no," according to the U.S. National Labor Relations Board, which oversaw the vote. The result still needs to be certified.

"While this loss stings, we’ll keep our heads up,” UAW President Shawn Fain said at a nearby union hall following the loss.

"I’m not scared at all,” he said when asked about losing momentum. “This is a setback.”

The UAW had hoped to continue a run that includes the overwhelming VW win in Tennessee, as well as a lucrative new contract at six Daimler Truck facilities across the South. Daimler Truck was spun off from what is now Mercedes.

The UAW's next steps are uncertain. The union previously cited organizing progress at a Hyundai plant in Alabama, and Toyota plants in Missouri and Georgetown, Kentucky.

A win at Mercedes would have marked the second foreign-owned automaker in the U.S. South to join the UAW, but instead the union will need to redouble efforts to win over workers in a region that has previously been inhospitable to unions. Widening its reach beyond the Detroit automakers is critical for the UAW to maintain its influence within the industry.

Until the Tennessee VW win, the union had repeatedly failed to organize a foreign-owned automaker in the U.S. South for its nearly 90-year existence.

Much of the politically conservative South has treated left-leaning unions as enemies, passing laws that make it difficult to operate, and anti-union forces have warned that companies are more likely to close union factories. A previous UAW corruption scandal that resulted in the arrest of several leaders further eroded support.

VW workers twice voted against the UAW before last month's win, and Nissan workers at a plant in Mississippi rejected the UAW by a wide margin in 2017. In 2021, workers at an Amazon.com warehouse in Alabama voted against forming a union by a more than 2-to-1 margin.

COMPLICATIONS

The loss complicates the story of how the UAW can market its influence, especially in the South, but it likely will not deal a significant blow to the rest of the UAW's organizing efforts, labor experts said.

"It's easy to overstate the momentum issue," said Stephen Silvia, a professor at American University who has published on the UAW's past organizing campaigns in the South.

"Ultimately it comes down to what is going on in each individual workplace," he added, emphasizing how just as a win at Volkswagen did not guarantee a victory at Mercedes, this loss does not guarantee future defeats.

The company made its feelings clear in the run-up. Signs urging workers to vote "no" were hung around the Alabama plant, and the company hired anti-union firms to speak with workers about the potential risks of joining the UAW, according to workers, as well as photos and audio reviewed by Reuters.

Fain on Friday said the automaker engaged in illegal behavior. Mercedes previously rejected claims it prevented union organizing efforts in Alabama.

"Our goal throughout this process was to ensure every eligible team member had the opportunity to participate in a fair election," Mercedes said in a statement after the vote. "We look forward to continuing to work directly with our team members."

Political opposition was staunch in this campaign, too. Six U.S. governors, including Alabama's Kay Ivey, signed a letter asking workers to reject the UAW. They said unionization would stunt the auto industry's growth across the South.

Mercedes also brought in a new president of its U.S. business in the weeks leading up to the vote, a change that made some workers hopeful that conditions could improve without the union.

Anti-union Mercedes worker Melissa Howell broke into tears of relief once the results were clear. She has worked for Mercedes for 18 years and felt her voice would be stifled if the union won.

In the last two-and-a-half weeks, she and others worked to stop the UAW, and she noticed anti-union momentum growing in the final days of the campaign. "In the last week, people were coming to me," Howell said. "I noticed a huge change in the attitudes of people."

(Reporting by Nora Eckert in Vance, AlabamaEditing by Ben Klayman, Peter Henderson and Matthew Lewis)