Gov. Haslam worried about VW scandal's effect on sales, jobs at Chattanooga plant

Gov. Haslam worried about VW scandal's effect on sales, jobs at Chattanooga plant

September 29th, 2015 by Mike Pare and Andy Sher in Business Around the Region

Tennessee Gov. Bill Haslam urged Volkswagen to quickly address consumers' worries about the company's vehicle emissions-testing scandal because of the potential impact on sales and jobs at VW's Chattanooga plant.

POLL: Will VW's U.S. sales fall sharply after the emissions-testing scandal?

State Sen. Bo Watson is interviewed by editors during a meeting at the Times Free Press.

State Sen. Bo Watson is interviewed by editors...

Photo by Doug Strickland /Times Free Press.

"My primary concern is getting Volkswagen back to where they're in a mode to sell cars," Haslam told reporters in Nashville on Monday.

Haslam's concerns come as state Sen. Bo Watson, R-Hixson, tries to set up a Chattanooga meeting between legislators and VW officials next month.

Watson said the meeting would publicly address worries related to the automaker's efforts to defeat emissions tests on many of its diesel vehicles — including the locally made Passat — and how VW will move forward.

"We want everybody working as much as they can work" at the plant, Watson said.

VW's Passat diesels represent about 29 percent of the sedan's U.S. sales, according to Kelley Blue Book. Jack R. Nered, KBB.com's executive editorial director and market analyst, said it's a reasonable concern that the emissions issue could, in the short term, affect the Chattanooga plant's workforce.

Nered added that he didn't think the problem will have long-lasting effects on VW sales. He said the situation offers a chance for the car company to more aggressively push its U.S. products and efforts to expand in America.

"It's American workers building American cars for American consumers," he said.

Chattanooga VW plant spokesman Scott Wilson said Monday afternoon the factory is operating as normal.

"The construction project for the plant expansion to build the midsize SUV and the production of Passats continues as before," he said. "We are currently in a ramp-up phase of the all-new Passat per our planned schedule."

VW has put a stop sale on all 2.0 liter, 4-cylinder, turbocharged direct injection-equipped vehicles. The company said it's working with agencies to obtain approval for model year 2016 2.0 liter TDI vehicles, which officials believe do not have any of the issues the government has identified in other vehicles.

"We are working very hard to get our 4-cylinder TDI business restarted as soon as possible," the company's statement said.

House Majority Leader Gerald McCormick, R-Chattanooga, said VW needs to get to the bottom of the scandal.

"You know they're talking about fines. I think they need to be talking about people going to jail if they did this," McCormick said. "It's a huge fraud by a huge company that has plenty of attorneys to vet this kind of thing. There's no excuse for it."

McCormick said plant workers have asked him, "'Do you think this is going to affect us? Or are they going to close the plant, that kind of thing. I can't imagine they would close the plant after making that big investment. It wouldn't shock me if they didn't slow down their expansion plans though.'"

State Rep. Gerald McCormick is seen in this file photo from a press conference in 2014.

State Rep. Gerald McCormick is seen in this...

Photo by Tim Barber /Times Free Press.

Meanwhile, Haslam said he has two concerns.

"No. 1, we have an investment in the original plant and then the expansion. Second, we obviously have a vested interest in their success; I mean, in them selling cars. And so we're urging them to get everything out in front of everybody as quickly as possible so existing customers can understand what the solution is going to be and [so] that Volkswagen can have a clear path forward."

Tennessee government provided an estimated $358.2 million of the original $577.4 million in incentives that drew Volkswagen to build its Passat in Chattanooga. 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.

"Obviously there's a lot of questions out there in the consumers' mind. I think that's why it's really important for Volkswagen to come out quickly and say, 'Here's what we're going to [do to] address our existing customers and here's why we can assure potential customers that they're going to get the vehicle they think they're buying,'" Haslam said.

Watson said there are worries of a domino effect on jobs related to the plant and its suppliers.

"That's all of our concerns," the Senate speaker pro tempore said.

Miguel Lopez-Quesada, a spokesman for Spanish VW supplier Gestamp, said it's too soon to have a clear forecast on how the scandal may affect that company.

Gestamp this summer announced a $180 million expansion in Chattanooga, the biggest ever for a supplier in Hamilton County, and plans to hire 510 more people.

The Passat is all the Chattanooga plant now makes, though VW is spending $900 million to develop a new midsize SUV and expand the factory.

"The SUV has an opportunity to be its saving grace," Watson said.

Nered said the fix for Passat vehicles likely won't be a software one, which was used to defeat testing procedures.

"It's difficult to conceive a software fix," he said, adding he believes there will be "a hardware" repair involving a urea-based system. Urea is a clear, non-toxic solution that can be stored in a tank onboard the vehicle that lowers pollutants.

"It doesn't appear any other car manufacturer has solved this problem without using such a system," Nered said.

Contact Andy Sher at asher@timesfreepress.com or 615-255-0550.

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

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