VW future, emissions fallout weighed in hearing

Sam McMillan says that while there's no evidence the workers at Volkswagen's Chattanooga assembly plant knew about the automaker's emissions scandal, he worries about the fallout.

"It's all the jobs that potentially could be lost," the Chattanooga resident said outside of Warehouse Row on Tuesday.

In a rare state Senate hearing in Chattanooga on Thursday, legislators are expected to learn more about how VW plans to move ahead in the wake of the diesel vehicle emissions cheating that has rocked the German car company.

State Sen. Bo Watson, R-Chattanooga, who will be chairman of the hearing, said he's concerned about a domino effect from the scandal that involves nearly 500,000 U.S. cars and about 11 million globally.

"That's all of our concerns," he said. "We put together a good workforce that's well trained. We want everybody to work as much as they can work."

Watson, who heads the Senate's Appropriations Subcommittee, said the hearing is a chance to review the more than $800 million in incentives that state and local government approved for the original VW plant construction and its current expansion.

"How are we measuring VW's performance relating to those incentives to assure the public we put proper measures in place?" he said.

The VW plant employs about 2,600 people making the Passat midsize sedan, and the automaker is spending about $600 million in Tennessee to expand the factory to make a new SUV in late 2016 with plans to hire 2,000 more workers.

Bo Watson

The plant was won in 2008 after a hard-fought battle with sites in Michigan and Alabama. The factory, the only Leadership in Energy and Environmental Design-approved auto plant in the U.S., has in large measure symbolized the new Chattanooga, helping woo hundreds of millions of dollars in investment by suppliers.

Mike Randle, publisher of Southern Business & Development magazine, said it's too early to tell how the emissions scandal may impact the Chattanooga factory.

"The cost is the issue," he said about the massive expenses, penalties, fines, and fees VW is expected to incur in the U.S. and globally due to the scandal.

VW has set aside $7.18 billion to pay for the fallout, but officials have indicated that may not be enough. New VW CEO Matthias Mueller already has said the company plans to review and cut all-but-essential investment worldwide.

Scott Wilson, a spokesman for VW's Chattanooga plant, said Monday that the expansion to build the new midsize SUV is on schedule.

"Construction of the buildings and integration of equipment is moving full steam ahead," he said.

Randle said he doesn't think the emissions-rigging revelations will give Chattanooga a black eye in terms of companies thinking about avoiding the area.

"The Chattanooga brand is a great brand," he said. "It's working on a lot of innovation. It's a great place to live."

Still, a lot of Volkswagen owners of diesel vehicles are troubled by the company's actions, and any drop in VW sales will take from what already is a small base, said Jack Nerad, executive market analyst for Kelley Blue Book.

"My sense is if [buyers] believed in diesel technology, they feel betrayed," he said. "They thought they had clean diesel vehicles."

Dr. Bill Stacy, the former UTC chancellor and Baylor School president, said at Warehouse Row that he thinks VW is "a great company" but that "they've besmirched themselves."

While he, too, doesn't believe Chattanooga has gotten a black eye due to the emissions issue, he said it is an embarrassment.

Cara Hoffman of Fort Payne, Ala., said VW's actions were "a disappointment." But she wondered how many people within the company beyond a few engineers knew that cheating software had been installed to deceive U.S. regulators.

Watson said that people with whom he has talked have expressed surprise and disappointment.

"Hopefully, in our conversation with VW, we'll get some sense of their commitment here, which I think is strong," he said.

Watson said he hopes VW officials will say that they're committed to building a new SUV with a quality and a price point that Americans will buy.

"If they hit those things, there's a chance to command the narrative," he said.

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