VW expansion, production on track in Chattanooga despite diesel scandal, state officials say

Diesel Volkswagens are seen behind a security fence on a storage lot near a VW dealership in Salt Lake City.

As Volkswagen manages what's termed as the biggest crisis in its history, Tennessee's economic development commissioner says the carmaker's Chattanooga plant expansion is on track.

State Economic and Community Development Commissioner Randy Boyd, in a memo to the General Assembly, said that 50 percent of VW's $930 million investment in the project is already spent or committed.

photo Randy Boyd

The north body shop expansion of the plant is complete, and equipment installation is underway, he said in the memo dated Monday.

Boyd, who personally visited the plant last Wednesday, said other parts of the expansion including the south body shop, assembly warehouse and paint shop are on schedule.

VW has said it wants to start producing a new sport utility vehicle for the U.S. market in a little more than a year.

Boyd also said that VW's new North American Engineering and Planning Center, which was announced as part of the expansion, is up to 70 employees, 63 of which are engineers.

He said the memo is an opportunity to share information on the project, adding that several legislators had questions regarding VW and the state's investments.

"I share the legislature's deep concerns about this issue," Boyd said.

State Sen. Bo Watson, R-Hixson, said he's trying to set up a Chattanooga meeting of some legislators with VW officials, likely in late October.

"It's an opportunity for the appropriation subcommittee of which I'm the chairman to review where we are in terms of incentives and other things," he said.

Watson said there's "a fiduciary responsibility to the citizens to make sure the investment is stable and sustainable" in the plant that's in his district.

The German automaker says that as many as 11 million of its cars equipped with diesel engines - including Chattanooga-made Passats - had software designed to fool emissions testers.

The revelation toppled longtime chief executive Martin Winterkorn last week and prompted the company to set aside $7 billion to pay for repairs, fines and lawsuits.

Clint Brewer, ECD's assistant commissioner for communications and marketing, said Boyd had already planned a trip to Chattanooga and decided to go by the VW plant last week.

Brewer said the memo was sent out to answer questions about the project "and about what we know to be true. We want to make sure the General Assembly has the information we have about the project."

Boyd said the state agreed to provide a capital grant to Chattanooga's Industrial Development Board for $165.7 million for site preparation, infrastructure, equipment and facility construction for the expansion. VW plans to hire 2,000 more workers at the plant.

The state also will provide a FastTrack training grant to VW for up to $12 million, Boyd said.

The commissioner said VW must maintain an average of 80 percent of the 2,000 committed jobs for a three-year period. The employment count to comply with this claw-back provision will be measured in July of 2020, 2021 and 2022, he said.

Boyd said VW must maintain an average of 1,600 filled positions from July 2020 to July 2022 to avoid the claw back. If the percentage drops below 80 percent, VW must pay back a proportional share of the $165.7 million to the state, he said.

Boyd said the training grant is paid out after VW has hired the employees so it's not subject to a separate claw back.

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

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