Volkswagen and the Chattanooga deal appears dead in the water

By Sinclere Lee

CHATTANOOGA (BNW) –
The Volkswagen deal appears to be dead in the water, but city officials are trying to keep the facts of the deal on hold until after city election in March. The handwriting has been on the wall for about 3-months that the plan construction of the billion dollar plant was in trouble.

“They [city officials] will never tell the citizens in Chattanooga the truth about their failure to secure the Volkswagen deal,” said Dr. Clifford Eberhardt, a candidate for City Council in the March elections.

Groundbreaking for Volkswagen’s Chattanooga plant has been postponed until March, a couple of months later than the January groundbreaking the company initially planned.

“That decision along with other recent developments related to the VW deal should have the citizens of Chattanooga up-in-arms,” Eberhardt said.

According to VW officials, board members for the company want to take part in the groundbreaking but they can’t fit it into their schedules this month. That’s a stalling tactic to keep city officials off the hook for their failure and to assure their elections in March.

“Always a bride’s maid but never a bride,” is how Dr. Eberhardt termed the deal.

“The board members for VW AG want to attend and, unfortunately, we couldn’t get all the schedules to coordinate until March,” said Jill Bratina, Volkswagen Group of America’s corporate communications director. How convenient!

The event is supposed to be “a ceremonial groundbreaking,” and construction on the $1 billion auto assembly plant at Enterprise South industrial park is ongoing, she said.

“The project is still on schedule,” Ms. Bratina said.

Volkswagen Group of America, Inc. announced several months ago that it will build a U.S. automotive production facility in Chattanooga where it will produce a car designed specifically for the North American consumer and invest $1 billion in the economy. The announcement is an important element of the company's overall U.S. strategy of connecting with its customers, increasing its competitiveness and tripling its U.S. customer base in the next decade.

The Chattanooga plant was design to build the Volkswagen Roadster, but since Porshes refused to buy Volkswagen last year, the carmaker put the Roadster on hold. If that’s the case, the citizens of Chattanooga should be able to connect the dots, but the won't.

"The U.S. market is an important part of our volume strategy and we are now very resolutely accessing that market," said Prof. Martin Winterkorn, CEO of Volkswagen AG. "Volkswagen will be extremely active there. This plant represents a milestone in Volkswagen's growth strategy. We will be selling 800,000 Volkswagens in the U.S. by 2018, and this new site will play a key role.

This, along with our growth strategy, is a prerequisite for the economic success of the company in the dollar region. We look forward to establishing an important mainstay for ourselves when we become the biggest European carmaker there."

Progress also continues on refitting office space in downtown Chattanooga for VW, said David Barrueta, who is leasing space in Chestnut Tower on Chestnut Street.

Volkswagen is leasing three floors of the building at 605 Chestnut St. so it will have space to hold up to 140 workers, including its top local leadership.

“This is all double talk to keep the people in Chattanooga in the blind until after the elections... this is how they operate in this city,” Eberhardt insists.

Plummeting vehicle sales have indefinitely postponed Toyota’s plans to build its Prius hybrid in Mississippi, and car plant have been closing everyday in this country. So, why would Volkswagen build a billion dollar plant in Chattanooga when they can buy one of the closed plants for a fraction of the cost?

It just doesn’t make sense.

“So far all the word from VW has been absolutely pushing forward and moving ahead with it,” Gov. Bredesen said. “I’ve heard no reservations about that at all.”

Since Toyota announced that it was delaying production of its gas/electric Prius at a factory under construction in Blue Springs, Miss., because of steep declines in sales, how can VW continue plans to build a $1 billion factory that would employ about 2,000 people?

It just doesn’t make sense.

Only a few weeks ago, VW spokeswoman Jill Bratina dismissed a report by a German auto publication that 2,000 VW managers would meet and discuss cost-cutting measures this week, including reviewing production plans for the Chattanooga plant as well as VW factories in India and Russia.

“There has been no change in plans whatsoever with the Chattanooga facility,” Bratina insists, yet, this is lie she told the Times Free Press.

“Everything is on go,” Mr. Kisber said. “For competitive reasons, they want a U.S.-based factory. I feel very confident that things are moving forward and will continue to.”

The 30,000 square feet also will be used for VW’s purchasing and administrative support functions, according to VW. In addition, there could be a VW sign placed on the building.

The Chattanooga City Council recently approved a $40 million bond initiative that will help pay for improvements at Enterprise South industrial park as part of expenditures for Volkswagen AG, but postponed the bond for no apparent reason

Dan Johnson, chief of staff for Mayor Ron Littlefield, the money will be used for new work and does not pay for work already conducted at the 1,350-acre site.

“It’s going to authorize us to start spending money,” Mr. Johnson said. “It’s just to get the ball rolling.”

Local tax dollars to prepare Enterprise South industrial park for VW could reach up to $80 million before the plant even is built, but city officials say the investment is worth it.

"We didn't give away anything we couldn't or shouldn't," Chattanooga Mayor Ron Littlefield said.

The city of Chattanooga already has spent $10 million and could spend up to $40 million to prepare the site for VW, Mr. Littlefield said. On Tuesday, the City Council approved a $40 million bond issue to pay for site improvements, although officials said they expect to spend only about $20 million.

Hamilton County Finance Director Louis Wright said the county is looking at about $20 million on top of the $10 million already spent, "but we're still in the looking stage."

The money is expected to pay for a proposed welcome center, a fire station, a training center, rail improvements, road, sewer and telecommunications lines, city records show. The 1,350-acre VW site sits within Chattanooga city limits, but it is owned jointly by the city and Hamilton County.

To bring VW to Chattanooga, city officials also agreed to give up property taxes that VW would have paid over a 30-year period, Mr. Littlefield said. Volkswagen still will pay the education portion of the property tax. … That’s about $5.5 million annually, Mr. Littlefield said, but that money will go to the county, which runs the school system.

"We can just assume the city doesn't get anything for 30 years," he said. Really!

The money is part of almost $500 million in incentives that federal, state and local officials plan to spend over the next several years, records show.

According to the council’s agenda, the money will be used to pay for infrastructure like site preparation, sewers, railroad lines, a training center, a welcome center, a fire station and telecommunications.

Mr. Johnson said the $40 million is one portion of what will be paid for improvements at the site. The state will also pay $70 million for work at Enterprise South and the county will add an additional $40 million, he said.

David Unruh, project director for the downtown nonprofit redevelopment group RiverCity Co., said the move will introduce a lot of vendors and suppliers to the central city.

“Some vendors and suppliers may want to locate downtown,” he said. “It sends a nice message to potential new restaurants and retailers. We’re so fortunate that, given the economy and that kind of thing, we have robust employers in downtown.”

The “German school” promised to VW officials by Hamilton County Schools administrators will open at Normal Park Museum Magnet when classes resume this month, officials have said. So far, five students have registered for its classes, officials said, but no one is sure how many to expect or what grades they will be in.

About two weeks ago, VW named Michigan-based builder Walbridge as the general contractor for the plant’s $30 million paint shop. Walbridge and its subcontractors will build the foundation and put up the steel, siding and roofing for the shop, expected to be weather-tight by the end of September.

Workers already have the building pads for the 1.9 million-square-foot facility essentially ready. However, they continue to move dirt at other parts of the 1,340-acre site. Groundbreaking for Volkswagen’s Chattanooga plant has shifted to March, a couple of months later than the January timeframe the company initially planned.

The hype about VW has calmed down and the hiring didn’t even get of the ground, so you tell me if Volkswagen is still coming to town!


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