Tennessee Democratic Party chief calls for probe into Gov. Haslam's withdrawal of VW incentives

Tennessee Democratic Party chief calls for probe into Gov. Haslam's withdrawal of VW incentives

April 26th, 2014 by Mike Pare in Business Around the Region

Volkswagen Chattanooga

Tennessee Democratic Party Chairman Roy Herron called Friday for a legislative investigation into the Haslam administration's withdrawal of its $300 million offer to Volkswagen to help pay for the expansion of its Chattanooga plant.

Herron said emails reported by a Nashville television station contradict previous administration statements and suggest that the governor pulled the incentives package when Volkswagen signed a neutrality agreement with the United Auto Workers.

Gov. Bill Haslam has maintained that the offer was pulled because Volkswagen failed to respond in due time. But a January email reported by WTVF-TV in Nashville indicates that the head of the Tennessee Department of Economic and Community Development, Bill Hagerty, said "circumstances had changed" and the state was withdrawing its incentive pacakge at the end of January, just four days after VW signed a pledge not to interfere with the UAW organizing drive.

"These emails reveal that there was no deadline, and the administration's previous statements were at best misleading and perhaps outright falsehoods," Herron said. "It is now clear the administration held over 1,000 Tennessee jobs hostage for political reasons."

Haslam denies he withheld incentives due to the UAW organizing effort at the Chattanooga VW plant.

Emails released Friday show Volkswagen warned Tennessee officials during difficult negotiations over incentives to expand the German automaker's lone U.S. plant that the company has already secured offers to build a new vehicle elsewhere.

VW was still moving forward with a draft memorandum of understanding on incentives to expand the Chattanooga plant as recently as two weeks before a union election at the factory, according to emails obtained by WTVF-TV.

VW attorney Alex Leath said in a Jan. 27 email to the state ECD that the Volkswagen board would be presented options to build the new sport utility vehicle at the Chattanooga plant and "alternative sites outside of Tennessee."

Tennessee's $300-million incentive offer to expand the plant has been complicated by Republican politicians' opposition to the United Auto Workers campaign to unionize workers there.

"While we understand there are some 'non-deal' issues that are causing a delay in the TN solution, VW has been successful in reaching agreement on terms at the alternative locations," Leath said in the email released to The Associated Press by the department.

VW wants to create a works council at the plant representing both hourly and salaried employees. The company said that it can't do so without the involvement of an independent union.

But Republican leaders in the state have fiercely opposed the UAW gaining a foothold with VW, arguing that it would hurt Tennessee's ability to attract other manufacturers and suppliers. Before a February union vote, some warned the state Legislature could reject incentives if the UAW won.

The UAW ended up losing that vote 712-626. And on Monday the union abandoned an appeal of the outcome to the National Labor Relations Board, urging the state to quickly approve incentives to expand the plant.

In the January letter, Leath said he was drafting a memorandum of understanding "in an effort to advance the deal with Tennessee." That draft included incentives figures Leath said VW had proposed to the state several months earlier.

WTVF-TV reported that economic development officials responded to the draft memorandum by declaring the $300 million incentive deal was off the table.

Hagerty said then in an email to a negotiating partner at Volkswagen that "circumstances have changed," causing the state to revoke its offer.

Hagerty did not specify which circumstances had changed in the email, but said he looked forward to "renewing our dialogue and determining the appropriate level and terms of state support for this important project."

But State Rep. Mike Stewart, D-Nashville, who reviewed the emails, told WTVF-TV that "the only circumstance that changed was that Volkswagen -- which is part of its business policy -- said it would cooperate with the workers at the plant." VW signed a neutrality agreement on Jan. 27 with the UAW, pledging not to oppose the unionizing effort and allowing UAW representatives to present their case to the workers.

Stewart accused Hagerty and Haslam administration officials of "essentially holding Volkswagen hostage and saying, "if you don't do what we want, based on our political agenda, then we are going to withhold hundreds of millions of dollars" -- which are, of course, taxpayer dollars."

But Clint Brewer, an ECD spokesman, said the draft memorandum of understanding document referenced in the email was not an effort by VW to "close the deal" on the Aug. 23, 2013, incentive offer.

An attorney for the company contacted the department on Jan. 27 at the request of his client, Volkswagen, to move forward with creating the legal language for a draft MOU, Brewer said.

The attorney said the company wanted to work on a draft MOU in the interest of saving time should an economic incentive package get worked out between VW and the state, the ECD spokesman said. The attorney told the department he was not authorized to talk about the incentive package outlined in the August 23 offer, only the legal language for a draft MOU, Brewer said.

He said the draft MOU was not a commitment by VW to locate their new project in Tennessee nor was it an acceptance of the Aug. 23 incentive offer according to the company's own law firm.

The German automaker's CEO, Martin Winterkorn, announced at the Detroit auto show in January that a new seven-passenger SUV will go on sale in the U.S. in 2016 and that production would either be in Chattanooga or at a plant in Mexico

Haslam told reporters after the NLRB challenge was withdrawn by the UAW that he hoped to quickly re-engage in talks with Volkswagen that had been stalled since January.