The fallout of the Dieselgate scandal isn’t limited to Volkswagen’s headquarters in Germany, it affects every locale hosting a VW factory. On Monday, Tennessee Governor Bill Haslam urged Volkswagen to act quickly to resolve Dieselgate, because of the impact on sales and jobs at the factory VW is building in Chattanooga, according to a report in the Chattanooga Times Free Press published on Tuesday. The statements from Tennessee lawmakers, while showing concern for the environment and the massive fraud committed by Volkswagen, also demonstrate an overriding concern that VW’s investment in their Chattanooga factory pay off not only for Volkswagen but for Tennessee.
Haslam is quoted saying “My primary concern is getting Volkswagen back to where they’re in a mode to sell cars.” State Sen. Bo Watson, R-Hixson is working to set up a meeting between Tennessee legislators and Volkswagen in October. That meeting is meant to air concerns over Volkswagen’s cheating on emissions tests, and what VW plans are to move forward. Watson is quoted saying “We want everybody working as much as they can work.”
Chattanooga VW plant spokesman Scott Wilson is quoted saying the plant is operating normally: “The construction project for the plant expansion to build the midsize SUV and the production of Passats continues as before. We are currently in a ramp-up phase of the all-new Passat per our planned schedule.”
State House Majority Leader Gerald McCormick, R-Chattanooga is quoted calling for Volkswagen to get to the bottom of the scandal, the potential for huge fines and jail time for certain people. But he also notes local workers at the plant are worried about their future, asking 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.'”
As Gov. Haslam put it, Tennessee made an investment in this factory and its expansion, and therefore “we obviously have a vested interest in their success; I mean, in them selling cars.” That investment was an incentives package estimated at $358.2 million, with local government kicking in another $219.2 million, to draw Volkswagen to build the Passat in Chattanooga. The factory expansion, to add another line for building an SUV, was incentivized with another $260 million in incentives from Tennessee, Chattanooga and Hamilton County governments.
Volkswagen AG has factory operations in countries around the world. In some other countries, like Spain, local officials have expressed worries whether the Dieselgate scandal would threaten VW’s investments in their locale.
The Dieselgate scandal concerns a multi-year fraud by Volkswagen to avoid emissions control laws. The company designed several of its 2.0 liter TDI Diesel cars to detect when the car was being subjected to an emissions test, and only then to turn on emissions control components. In all other cases, the emissions control system was turned off, resulting in NOx emissions much higher than allowed by the Clean Air Act.
Governments around the world make this kind of “investment” all the time, providing incentives to a company and looking for some tax benefit or jobs growth down the line. The question is how much dependency governments have on the success of corporations lured into their territory, and whether that will cause a government to give a wrong-doing corporation a slap on the wrist.