Tennessee offered $300 million to VW as UAW tried to organize Chattanooga plant, documents show

VW INCENTIVESAmong those offered by the state in August 2013:• $100 million infrastructure grant• $66.6 million "super job tax credit"• $27.4 million industrial machinery sales and use tax exemption• $20 million industry machinery creditSource: State of Tennessee

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photo The chassis of a Volkswagen Passat travels along the production line.

Volkswagen was offered about $300 million in financial incentives by Tennessee economic development officials to attract a new vehicle line to the Chattanooga plant and a new American VW headquarters that could bring 1,350 jobs, documents show.

The incentives offer, dubbed Project Trinity, was made last August as the United Auto Workers union was trying to organize plant employees, which led to a February election that the union lost by a worker vote of 712 to 626.

The offer sheet, first reported by Nashville TV station WTVF, said the incentives were contingent on VW discussions about setting up a works council at the plant being concluded to the "satisfaction" of the state. Gov. Bill Haslam and other Tennessee Republican politicians have been vocal critics of potential UAW recognition at the plant.

State Rep. Mike Turner, the Democratic caucus chairman, on Tuesday said the incentives looked like strong-arm tactics.

"I think it's bullying, bribing, intimidation, whatever you want to call it," Turner said. "It looks to me like that's what it was."

But Haslam said in Chattanooga on Tuesday night that incentives were never tied to an outcome of the UAW vote, and that the package wasn't used as leverage against plant workers.

Haslam said his opinion about the UAW gaining a foothold in the plant wasn't a secret.

"We had an interest in the outcome," he said.

Haslam added that incentive discussions with VW have not restarted since the February plant election.

"[VW] said 'We're not ready yet,"' the governor said. "We're waiting for them to come back to us, which we hope is soon."

The UAW has appealed for a revote to the National Labor Relations Board, saying that outside interference from politicians and third-party groups unfairly influenced the results.

An NLRB hearing on the appeal is slated for April 21 in Chattanooga.

It's not known if Haslam or other Tennessee politicians will be subpoenaed to testify, though that's said to be a possibility.

Officials differ on the meaning behind the incentives package.

State Rep. Gerald McCormick, R-Chattanooga, said such incentives would be made more unpopular in the Republican-led General Assembly if the UAW was involved at the plant.

"It's hard enough to get those incentives approved anyway," he said. "Adding to that the idea that you really have a hostile labor union that's basically an arm of the Democratic Party, it tells you it makes it more difficult to pass when you're bringing that group to town."

Clint Brewer, a state Economic and Community Development Department spokesman, said the state's offer did not preclude the creation of a works council or union representation as a condition for the incentives.

He said language in the incentives offer addresses concerns officials had at the time about process. In August, it was unclear whether a German-style works council was possible under U.S. law, he said. VW determined that a works council couldn't be set up unless there was a union.

Brewer said the incentives offer regarding a new sport-utility vehicle was withdrawn in January before the vote was called. Chattanooga is said to be the front-runner over Mexico to land the vehicle.

Jack Nerad, Kelley Blue Book's executive marketing analyst, said the incentives package offered in August "seems to be generous" and that the number of new jobs would be the largest created at an auto plant in the last two or three years.

He said taxpayers often scratch their heads at the size of such packages, but auto plants offer longevity for employees and communities and usually bring more related supplier jobs than do other types of businesses.

photo Bill Haslam

"It has become very competitive among the states," Nerad said.

The incentives package also includes a headquarters relocation tax credit for 150 employees. It's unclear whether that provision relates to potential movement of employees from VW's world headquarters in Wolfsburg, Germany, or from Volkswagen of America's Herndon, Va., home office.

The entire state incentives package would equate to $222,059 per job based on 1,350 full-time slots. The city of Chattanooga and Hamilton County also are expected to provide additional property tax breaks and could pay for other infrastructure and transportation upgrades for a bigger plant.

Patty Rasmussen, senior writer for industry magazine Site Selection, said attracting a second vehicle to the Chattanooga plant also gives the area a chance to woo more supplier positions.

"You've seen that happen in the Southeast," she said, citing both BMW's plant in South Carolina and Kia's in Georgia, both of which have drawn thousands of jobs at other automotive-related businesses in the region.

Nerad said there's a ripple effect not just on the supplier level, but for the region's economy overall such as spending on vendors and at other businesses.

He added that a new SUV for VW would be "a godsend for them." Nerad said that mid- and full-size SUVs are among the hottest-selling segments in the auto industry, and that VW is considering new offerings in each.

"Moving in those directions would be a big boon to the company and its North America fortunes," he said.

Charles Wood, the Chattanooga Area Chamber of Commerce's vice president of economic development, said the project represents the potential for a substantial increase in jobs at the factory that now makes just the Passat sedan.

Wood said the best business case for the project is "leveraging the significant investment Volkswagen has already made in Chattanooga, and we remain hopeful for a positive decision in the near future."

In 2008, VW received about $577 million in state, federal and local tax breaks for bringing a new assembly plant to America and 2,000 jobs. The plant now employs about 2,700 people.

VW announced last year it wanted to start up a works council, which can represent blue- and white-collar workers at the plant over day-to-day operational issues such as training and safety. The company said then it had begun talks with the UAW about the union organizing its hourly production work force.

However, some Republican lawmakers, including Haslam and U.S. Sen. Bob Corker, R-Tenn., complained loudly that the UAW would hinder economic development efforts. In February, the company sought a National Labor Relations Board-certified election. Some two weeks later, a three-day vote was held and the UAW lost by a 53 percent to 47 percent margin.

photo Gary Casteel, U.A.W Region 8 Director, voices his disappointment after retired circuit judge Sam Payne announced that Volkswagen employees voted to deny representation by the United Auto Workers labor union.

Gary Casteel, a UAW regional director, told WTVF that the offer sheet and other documents confirm the union's claims of a coordinated anti-union campaign.

"It's obvious that the state was threatening or at least intimidating Volkswagen," he said.

Brewer said that the state had kept its offer to VW on the table for almost two months longer than the standard 90 days.

"The administration has been consistent in saying that the state has a vested interest in the VW plant in Chattanooga," he said. "First, it has a significant financial investment in the facility. We have also heard from VW that to grow in Chattanooga, the company needs support from the state when it comes to addressing labor costs and in building a more robust supplier network."

State Sen. Bo Watson, R-Chattanooga, who during the VW election said that the passage of incentives would face a more difficult time in the Legislature with a pro-UAW vote, said he isn't privy to a lot of state ECD discussions until they reach a certain point. That's usually the point, he said, "where they got to figure out whether they can come up with the votes for some kind of incentive."

"I had no idea about any of that," Watson said.

Regardless of the intent of the labor-related passage in the incentives package, Watson reiterated his stand that a union presence at VW would make lawmakers more squeamish about handing out millions of dollars to the automaker.

"What I was saying was, look, our delegation will fight for everything in Hamilton County, but this just makes it more difficult," Watson said. "That's a true statement."

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318 or Andy Sher at asher@timesfreepress.com or at 615-255-0550.