VW reviewing future investments, but local officials remain upbeat on Chattanooga plant

VW reviewing future investments, but local officials remain upbeat on Chattanooga plant

October 7th, 2015 by Mike Pare in Local Regional News

The VW logo is seen on a steering wheel of a VW car in Berlin, Germany.

Photo by Associated Press /Times Free Press.

Volkswagen's chief warned Tuesday the carmaker is reviewing its planned investments, but local officials remained upbeat about the company's expansion at its Chattanooga assembly plant.

"There's no reason to believe the plant won't move forward," said Hamilton County Mayor Jim Coppinger as the company continued work on a $600 million project to produce a new SUV that VW officials believe is key to U.S. sales.

The Rev. Jesse Jackson, in Chattanooga on Tuesday, weighed in on the VW emission-rigging issue, saying the company must make "strong corrective actions, but [the plant] must not be closed."

"There's more than 2,000 people who work here and own homes and businesses in Chattanooga, and we need those jobs," the civil rights leader said. "The workers should not be punished because of some scheme concocted in Germany."

In addition, Tennessee senators will hold a hearing in Chattanooga on Oct. 29 to review the financial impact, if any, on the state from VW's violation of U.S. emissions standards with some of its vehicle diesel models.

New VW CEO Matthias Mueller told employees in Germany the company will review its investments and that "what isn't absolutely vital will be canceled or delayed."

He said the company would have to put its future investments in plants, technology and vehicles "under scrutiny" to spend only what was needed to maintain a leading edge.

In Chattanooga, VW started expanding its Chattanooga plant early this year. Production on the SUV is slated to start in late 2016.

On Tuesday, the Hamilton County Commission extended tax incentives to a site VW supplier Gestamp bought last month on Jersey Pike. The extension of the tax breaks includes improvements Gestamp plans to make at the site and equipment, but not land or existing buildings. Gestamp has said the new plant will be part of the $180 million expansion it unveiled this summer to support the SUV.

Later, a Gestamp official said that "our plans and commitment have not changed so far" relating to its Chattanooga plans, which include hiring 510 more people above the nearly 300 who already work in the city.

Coppinger said VW is on schedule with its modifications to the plant. He said both he and Chattanooga Mayor Andy Berke have met with local plant officials separately since the emission scandal broke.

"We think it's going to move ahead," the county mayor said.

He said the U.S. market and the new SUV, based on its CrossBlue concept prototype, are important to VW's strategy.

"We need for that plant to be successful," Coppinger said. "It's important to our economy."

Mike Randle, publisher of Southern Business & Development, said that both Toyota with its acceleration issue and General Motors with its ignition problems emerged from those recent crises.

But, he said, the VW expansion isn't too far along to postpone it, and he worried about the proposed visitors center in downtown Chattanooga.

Randle said VW shouldn't cancel its new engineering and planning center in Chattanooga. It already has hired 70 employees, 63 of which are engineers.

"Don't pull the plug on the research center," he said.

State Economic and Community Development Commissioner Randy Boyd has said that 50 percent of the total $930 million VW is investing in both developing the SUV and building the expansion is already spent or committed.

Jackson, in a meeting with Times Free Press reporters and editors, said the emissions issue with which VW is dealing "affects the air that all of us breathe," and he said that to do what VW did intentionally to make a profit was "a heinous crime."

"For that crime there must be corresponding punishment," he said. "But we should not go so far as to close them [VW facilities], but we should correct them. We must separate the bath water from the baby in this instance."

Meanwhile, state Sen. Bo Watson, a Hixson Republican and chairman of the Senate Finance Committee's Appropriations Subcommittee who asked for the VW hearing, will head the meeting that will be held on Oct. 29 in Chattanooga later this month. The hearing will be from 1:30 p.m. to 3:30 p.m. at the Hamilton County Department of Education, 3074 Hickory Valley Road.

Tennessee government provided an estimated $358.2 million of the original $577.4 million in incentives that persuaded Volkswagen in 2008 to locate its plant in Chattanooga to make the Passat sedan. Local governments provided the remaining $219.2 million.

And this year, Tennessee, Chattanooga and Hamilton County governments committed to more than $260 million in incentives for a new line of SUV production. About $165 million of that is from the state.

Staff writers Dave Flessner, Andy Sher and The Associated Press contributed to this story.

Contact staff writer Mike Pare at mpare@timesfreepress.com or 423-757-6318.