Chattanooga: State gives green light for VW training center

Chattanooga: State gives green light for VW training center

March 13th, 2009 by Mike Pare and Andy Sher in Business

NASHVILLE - The State Building Commission gave a green light Thursday to the planned $40 million Volkswagen training center in Chattanooga.

It also approved grants continuing to reimburse the city and Hamilton County for local funds already spent on site preparation under agreements with the state.

Officials at Volkswagen, despite a record 2008, said Thursday that vehicle sales, revenues and earnings would fall in 2009 amid the global downturn. But, officials said the company is positioned for a rebound in the market.

"We are already looking ahead to the period after the crisis," said VW Chief Executive Martin Winterkorn in a statement. "Because one thing is certain: the automotive markets will pick up again. And the Volkswagen Group is preparing very systematically for when this happens."

Money flowing

Building Commission members authorized the state to spend $70 million on various infrastructure projects associated with the $1 billion auto assembly plant, which is expected to employ some 2,000 workers and create thousands more among VW suppliers in the area.

Commitments also include some $80 million for overall site preparation. The combined total state commitment for site preparation, infrastructure and the training center comes to $190 million, officials said.

"This is a further green light in the process, and there will be other approval that will have to be obtained in the future," said state Treasurer David Lillard, a Building Commission member.

He said Building Commission actions included approval of memorandum of understanding agreements the state had entered into for the Volkswagen project as well as the Hemlock Semiconductor LLC project in Clarksville.

"We approved the MOUs they (state officials) had originally entered into with VW and Hemlock and the local industrial development boards to do the projects and do the incentives and basically gave the authority to go ahead with those projects," Mr. Lillard said.

Assistant state Economic and Community Development Commissioner Mark Drury said the Building Commission "was giving their blessing for what the money will be spent for. Some of the money has already been spent."

Mr. Drury said about $50 million has been reimbursed to the city and county so far for site prep.

Gov. Phil Bredesen on Tuesday signed a $262 million bond authorization bill that allows the state to use bond proceeds to pay its obligations on both the VW and Hemlock projects.

But during Thursday's Building Commission meeting, Mr. Lillard said he still hopes state commitments can be funded less expensively by using at least some federal stimulus funds. The final decision will come later, he said.

The city's Industrial Development Board ultimately will be reimbursed $80 million for site preparation and $70 million for infrastructure. The Health, Education & Housing Facility Board of the city of Chattanooga eventually will be reimbursed $40 million on the training center for VW workers.

VW, despite the dramatic deterioration in its business environment, reported it met unit sales, sales revenue and earnings targets last year and recorded the best figures in its history.

Sales revenue grew by 4.5 percent to about $146 billion on the back of a 1.3 percent rise in unit sales to 6.3 million vehicles. At about $8 billion, operating profit was up by 3 percent year-on-year.

"We made tremendous efforts throughout the entire company to achieve our ambitious targets, and we achieved them," said Mr. Winterkorn.