Volkswagen Chattanooga tax credits may be safe
The Volkswagen Chattanooga plant was not involved in the emissions scandal, but tax benefits afforded to the factory have come under scrutiny.
Any discussion of taking away incentives or grants for Volkswagen's Chattanooga, Tenn., plant in the wake of the emissions cheating scandal plaguing the automaker is only theoretical, said a Tennessee state official.
Tennessee Department of Economic and Community Development Commissioner Randy Boyd did mention the idea of clawbacks — requiring a company to return state money if the company doesn't meet previously agreed upon benchmarks — in a letter he sent in late September to the General Assembly. But that letter merely outlines the clawback provision in the latest $165 million capital grant provided to VW.
"Any discussion of clawbacks is hypothetical. We have assurances directly from company executives that Volkswagen's expansion remains on track," said Clint Brewer, a spokesman for the department.
Jeannine Ginivan, a VW spokeswoman, said in a prepared statement that the Chattanooga facility continues to operate normally.
"The construction project for the plant expansion to accommodate the midsize SUV and the production of Passats continues as before. We are currently in a ramp-up phase of the facelifted 2016 Passat per our planned schedule," Ginivan said.
State lawmakers do plan to discuss the idea of clawbacks at a legislative hearing, tentatively planned for Oct. 29 in Chattanooga. Senate Pro Tempore Bo Watson, R-Hixson, said clawbacks will be discussed.
"Metrics and 'clawback' provisions will be a part of the discussion, and it is too early to determine what, if any, metrics VW may have attained," Watson said in a prepared statement to The Tennessean.
"The purpose of the hearing is to allow for a transparent conversation between the Senate, ECD, and VW about how VW moves forward in Tennessee and insure the public that the Senate takes its fiduciary responsibility seriously, which means we will review the components of our most recent incentives and VW's performance relative to the incentives."
The German automaker faces billions of dollars in fines after a U.S. investigation revealed at least 11 million cars were installed with software that allowed them to cheat on emissions testing. The incoming chairman for VW recently said the scandal is "an existence-threatening crisis for the company," according to USA TODAY and other reports.
"I share the legislature's deep concerns about this issue," Boyd said in his letter to lawmakers. "Volkswagen is one of Tennessee's major partners, and over two administrations the state has made significant investments in the company and their supply chain."
VW has received two incentive packages from the state: one in 2008 worth more than $577 million and the $165 million grant in 2014. The company already met all of the requirements outlined in the 2008 agreement, Brewer said, so no clawback would be available.
There is a clawback provision in the latest deal, but as of now it's irrelevant: The deal is set up on a reimbursement basis, Brewer said. VW hasn't asked to be reimbursed through the grant, so there's no money for the state to recoup yet.
The clawback provision in the 2014 deal requires VW to maintain an average of 1,600 filled positions out of the 2,000 jobs planned for the company's nearly $1 billion expansion plan in Chattanooga. If the company doesn't maintain 1,600 positions between July 2020 and July 2022, it has to pay back a proportional share of the incentive package, Boyd told lawmakers in his letter.
Watson frequently criticizes the incentives, as well as any plans to unionize the workforce at the massive Chattanooga plant. He and other lawmakers threatened to try and remove the incentives if the United Auto Workers were able to unionize the roughly 3,200 workers at the plant.
But Watson said Monday the upcoming hearing has nothing to do with his anger over unionization.
"No. These are mutually exclusive issues," Watson said in a prepared statement.
"Right now I am only concerned in insuring the stability and sustainability of our citizens' investment in VW."
Plans for the Senate hearing are still being finalized.