Canadian Manufacturing

For Volkswagen, the buck stops in Chattanooga

Lawmakers in Tennessee—where Volkswagen has it's only U.S. plant—reconsider $900 million in federal and state incentives



NASHVILLE—Lawmakers in Tennessee plan to hold hearings over whether the Volkswagen emissions scandal could imperil the nearly $900 million in state and local incentives that have been directed toward the German automaker’s lone U.S. plant in Chattanooga.

Volkswagen has been reeling from revelations that it used secret software to thwart diesel smog tests on nearly 500,000 cars in the United States. The company has since admitted that the software was installed on some 11 million vehicles, and CEO Martin Winterkorn has said he’s “endlessly sorry” for tarnishing the VW brand.

Republican state Sen. Bo Watson, who has been a vocal critic of Volkswagen’s labour policies, cited the state’s “significant investment” into the Chattanooga plant in calling for a Senate Finance Committee hearing.

“I am very concerned as to the financial impact these violations could present to the state of Tennessee,” Watson wrote in a letter to the panel’s chairman. “Any action that threatens the stability and sustainability of the investment should be reviewed by the finance committee, without delay.”

Volkswagen received about $577 million in incentives to build the plant in Chattanooga in 2008. Another state and local package worth up to $300 million was offered last year to persuade VW to expand the plant to build a new SUV there starting next year. The state portion of the most recent incentive package would be subject to a “clawback provision” should VW fail to meet its spending and hiring goals at the factory.

Senate Finance Chairman Randy McNally, R-Oak Ridge, said he has agreed to schedule a hearing for Watson soon.

“I think he’d just like to provide some reassurance from Volkswagen to the Legislature and the public that the investments we’ve made are in good order,” McNally said in a phone interview. “I don’t think we’d get into the details of what they’ve been cited for and don’t think they’d be able to answer that anyway.”

A Volkswagen spokesman in Chattanooga did not immediately respond to email and text messages seeking comment about the hearings. Neither did a spokesman for Republican Gov. Bill Haslam, who told reporters on Monday that Haslam was concerned about Volkswagen’s problems.

“Volkswagen is somebody that’s a major partner for us in the state of Tennessee, both in terms of investment and the jobs created,” he said. “We’re obviously very interested in their continued growth, but they’re going to have to address this issue.”

Republican lawmakers in Tennessee have been wary about Volkswagen’s openness toward the United Auto Workers union gaining a foothold at the plant. Watson earlier this year labeled Volkswagen a “magnet for organized labour, intentionally” before being the lone senator to abstain from a vote on incentives for the factory located in his home town.

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