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NASHVILLE -- Tennessee lawmakers want to know whether fallout from Volkswagen's emissions-testing scandal may cause nearly $900 million in state and local government incentives for the German automaker's Chattanooga plant to disappear like smoke.

At the urging of state Sen. Bo Watson, R-Hixson, Republican Senate Speaker Ron Ramsey and Senate Finance Chairman Randy McNally, R-Oak Ridge, agreed Tuesday to schedule a hearing on revelations the company sought to evade U.S. emissions standards for pollution on some 500,000 vehicles nationwide.

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This is the diesel engine from Volkswagen that faked emissions test results. Volkswagen's stunning admission that it sold diesel-powered cars that intentionally faked emissions testing results has left many of their owners — who thought they were buying fuel-efficient and environmentally friendly vehicles — angry and feeling betrayed.
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State Sen. Bo Watson is interviewed by editors during a meeting at the Times Free Press.
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Senate Speaker Ron Ramsey, R-Blountville, speaks to reporters in his office on March 28 in Nashville, Tenn.
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Tennessee Senate Finance Chairman Randy McNally of Oak Ridge, left, and fellow Republican Sen. Bo Watson of Chattanooga participate in a hearing in Nashville on Tuesday on a proposed constitutional amendment to ban a state income tax . The Finance Committee voted 9-1 to advance a proposed constitutional amenkdment to a full Senate floor vote.
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Calling the reports "troubling," Watson said in his letter to McNally that he wants a meeting "without delay" to hear testimony from company and state officials.

"While all of the relevant facts may remain unreported at this time, I am very concerned as to the financial impact these violations could present to the State of Tennessee," said Watson, who has long been critical of VW's labor-friendly policies.

Watson noted, "Tennesseans have made a significant investment in Volkswagen, and any action that threatens the stability and sustainability of the investment should be reviewed."

Volkswagen has acknowledged emissions test-beating software was installed in an estimated 11 million vehicles worldwide. Investigations are underway in the U.S. and Europe.

The company's stock is taking a beating amid the scandal. Customers are outraged. Lawsuits are being threatened and now lawmakers in Tennessee, as well as in Washington, are holding hearings.

"Our company was dishonest with the EPA and the California Air Resources Board, and with all of you. And in my German words, we've totally screwed up," said Volkswagen Group of America President and CEO Michael Horn, while unveiling VW's new 2016 Passat this week.

Meanwhile, U.S. House Energy and Commerce Committee Chairman Fred Upton, R-Mich., and Oversight and Investigations Subcommittee Chairman Tim Murphy, R-Pa., announced Wednesday the subcommittee will schedule a hearing on the revelations.

"The American people deserve answers and assurances that this will not happen again," the two congressmen said in their joint statement.

In Tennessee, state lawmakers' concerns include the incentives.

Tennessee government, Chattanooga and Hamilton County provided an estimated $577 million worth of incentives in 2008 to get Volkswagen to locate its Passat plant in Chattanooga. The factory is located in Watson's Senate district.

Last year, the state and local governments agreed to new incentives worth as much as $300 million to persuade VW to add a second line of production for SUVs in Chattanooga instead of in Mexico.

Earlier this month, the State Building Commission gave approval to $165.8 million in outright state grants for infrastructure and equipment for the SUV line. But approval of the grant, which was $168 million total because of the inclusion of unspent previous incentives, was made conditional on the OK of state bond counsel.

Unlike VW's original incentives, however, the state's newest incentives contain a "clawback provision." That enables the state to recoup funds in the event the company did not meet commitments in terms of hiring.

McNally, the state Senate Finance Committee chairman, said he "greatly" respects Watson and is "working on how best to approach this matter." Given the state's latest $165.8 million in commitments to Volkswagen, he said, "we want to be assured and want to assure the public that those commitments will not be affected."

The chairman said he will schedule a hearing soon.

Asked about the VW controversy on Monday, Gov. Bill Haslam told reporters "obviously we're very concerned about that." The German auto manufacturer "is a major partner for us both in terms of investment and the jobs created," Haslam added.

Senate Speaker Ramsey, the state's lieutenant governor, told the Times Free Press the situation was "depressing, hard to believe. On and on. We've made a huge investment."

Watson and most other Republican officials have long been upset with Volkswagen over its willingness to deal with the United Auto Workers, which lost a unionization drive at the plant but hasn't given up on organizing it. VW officials typically work with labor councils and are less hostile to unions than the GOP majority that runs Tennessee.

Earlier this year, Watson slammed the company during a Senate Commerce Committee hearing on the incentives.

"VW is a magnet for organized labor, intentionally," Watson warned colleagues during the hearing and refused to vote yes or no on them. But Watson, vice chairman of the Finance Committee, later voted for them in the finance panel and on the Senate floor as part of the state's overall budget.

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

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