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VOL. 39 | NO. 38 | Friday, September 18, 2015

Tennessee leaders try to allay fears about impact of VW scandal

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NASHVILLE (AP) - As an emissions cheating scandal engulfs the German automaker Volkswagen, Tennessee officials are trying to soothe fears about the potential impact on the company's Chattanooga factory, the crown jewel of the state's economic development efforts of the last decade.

"We have been assured by Volkswagen that they are not going anywhere and will continue to grow in Chattanooga," Republican Gov. Bill Haslam said through a spokesman. "But they have to address this issue."

Chattanooga was selected in 2008 as the site of Volkswagen's first U.S. plant in decades. It was part of a strategy endorsed by then-CEO Martin Winterkorn to boost North American sales. Winterkorn resigned Wednesday, days after admitting that the world's top-selling carmaker had rigged diesel emissions to pass U.S. tests during his tenure.

Winterkorn earlier this year won a power struggle with the chairman of Volkswagen's board that observers said was in p art over Volkswagen's underperformance in the U.S. market, where the company saw market share drop to 2.2 percent in 2014.

The initial success of the only car produced at the Chattanooga plant, the midsized Passat sedan, soon faded. The company has sought to breathe life into its American sales by building a new SUV in Chattanooga that is scheduled to hit the market late next year.

The decision to expand the plant to build the new vehicle in the B SUV category was helped by a state and local incentive package that could be worth up to $300 million.

Chattanooga Mayor Andy Berke, a Democrat, said he has spoken with VW officials since the emission scandal broke. He said they told him plans at the plant are still on track.

"VW officials assured me they are taking this matter seriously and explained how critical the B SUV is to their North American market strategy," Berke said in an email.

Volkswagen's labor-friendly corporate culture has riled Tennessee Republicans who fear a United Auto Workers foothold at the Chattanooga plant could make the region less competitive for future investment.

One of the chief critics of VW's labor policies, Republican state Senate Speaker Pro Tempore Bo Watson of Chattanooga, has called for legislative hearings on how the "troubling" emissions cheating scandal could affect the state's investment in Volkswagen. GOP leadership in the Legislature has agreed to hold a hearing, but it is yet to be scheduled.

State Democratic Party Chairwoman Mary Mancini issued a statement Wednesday taking a more supportive approach.

"Volkswagen clearly made a mistake and they will have to be held accountable for that," she said. "But they are good corporate citizens here and they support Tennessee families by employing hundreds of our neighbors and friends.

"We're confident that they will see this through and be stronger than ever because of it," she said.

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