By Bernie Woodall

CHATTANOOGA, Tennessee (Reuters) – In a stunning defeat that could accelerate the decades-long decline of the United Auto Workers, employees voted against union representation at Volkswagen AG’s Chattanooga, Tennessee plant, which had been seen as organized labor’s best chance to expand in the U.S. South.

An official overseeing the vote, retired Tennessee Circuit Court Judge Sam Payne, said that a majority had voted against UAW representation by 712 to 626. Some 89 percent of workers voted, he said.

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The plant’s workers voted by paper ballot over the past three days, with individual votes hand-counted after the election closed at 8:30 pm ET on Friday.

The loss could further dent the prestige of the UAW, whose membership has plummeted 75 percent since 1979 and now stands at just under 400,000.

It also is likely to reinforce the widely held notion that the UAW cannot make significant inroads in a region that historically has been steadfastly against organized labor and where all foreign-owned assembly plants employ nonunion workers.

The vote faced fierce resistance from local Republican politicians and national conservative groups who warned that a UAW victory could hurt economic growth in Tennessee. While voting was under way on Wednesday, Republican U.S. Senator Bob Corker said VW would announce new investment in the plant if the UAW lost the secret ballot.

“We think it’s unfortunate that there was some outside influence exerted into this process,” Gary Casteel, regional director of the UAW, said after the results were announced, adding that the influence needed to be “evaluated”.

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Legal experts earlier in the day said they saw a difficult path to challenging a vote against unionization, based on Corker’s comments, given broad free speech protection for U.S. Senators.

President Barack Obama waded into the discussion on Friday, accusing Republican politicians who oppose unionization of being more concerned about German shareholders than U.S. workers.

For VW, the stakes also were high. The German automaker invested $1 billion in the Chattanooga plant, which began building Passat mid-size sedans in April 2011, after being awarded more than $577 million in state and local incentives.

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VW executives have said a new seven-passenger crossover vehicle, due in 2016 and known internally as CrossBlue, could be built at either the Chattanooga plant or in Mexico.

An announcement on where the vehicle will be produced could come as early as next week, VW sources said.

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(Additional reporting by Paul Lienert in Detroit and Andreas Cremer in Berlin; Editing by Matthew Lewis, Ross Colvin and Ken Wills)

[Image: Volkswagen employees inspect a VW 2012 Passat in the assembly finish department in Chattanooga Tennessee in this Dec. 1, 2011 file photo. By Billy Weeks for Reuters.]