Fight to land Volkswagen plant went to finish line

The Associated Press
Saturday, August 9, 2008

NASHVILLE, Tennessee: After an intense fight that involved two other states, Tennessee has hoisted what seems to be 2008's top trophy for automotive development in the U.S. investment worth nearly $1 billion and 2,000 new jobs for a Volkswagen assembly plant in Chattanooga.

Volkswagen plans to begin producing a new midsize sedan for the U.S. market at the plant in 2011 and possibly a second automobile "in the foreseeable future," according to spokeswoman Jill Bratina.

Initial production is pegged at 150,000 vehicles annually, with a capacity for as many as 250,000. Volkswagen aims to triple its U.S. sales to a million by 2018.

But Michigan and Alabama proved to be tough contenders, and Tennessee came very close to losing in the final laps.

A victory seemed possible early on after Volkswagen AG executives told Tennessee officials their first presentation for the plant "blew the others away" and put the state on a short list of sites.

But on June 30 15 days before Volkswagen's board was to pick the plant site Tennessee Gov. Phil Bredesen found out the German company had doubts about how the state planned to deliver on the infrastructure and training incentives it promised.

"I think it's fair to say that two weeks out we did not have it, it was going somewhere else," Bredesen said.

That's when staffers in Tennessee's Department of Economic and Community Development started pulling all-nighters and working through July 4th vacations ECD Commissioner Matt Kisber spent his family's Florida beach visit inside a condo revising the incentive structure to address Volkswagen's concerns.

Their effort got Tennessee back in the race.

Bredesen and Kisber who pride themselves on staying mum during sensitive industrial recruitment efforts divulged some of the behind-the-scenes work the state did to forge the Volkswagen deal in an interview with The Associated Press last week.

Tennessee's recruitment effort began about a year ago when the state heard through contacts in the economic development community that Volkswagen was looking for a U.S. manufacturing site.

Bredesen wrote to the chairman of Volkswagen AG last October asking for the chance to make a presentation. Kisber and his team visited the company's global headquarters in January.

They showed a 40-minute high-tech presentation that included virtually transporting executives from Wolfsburg, Germany, to the Chattanooga site and provided detailed information about logistics, suppliers and the quality of life in Tennessee issues the Tennessee recruiters knew were important to Volkswagen decision-makers. It closed with a video invitation from Bredesen to visit Tennessee — an offer that Kisber said the Volkswagen executives accepted on the spot.

Once in Chattanooga, Volkswagen officials dined on venison at the home of U.S. Sen. Bob Corker, the city's former mayor. Bredesen said they seemed disengaged at first, until the discussion turned to alternative fuels research in Tennessee. The state has invested $63 million in biofuel projects and is one of a handful of U.S. states seeking to turn switchgrass, corn cobs, wheat straw and other fibers into fuel.

"They got really interested," Bredesen said of the Volkswagen officials. "The fact that we were not only talking about it but that we had real plans under way was huge."

Volkswagen claims environmental responsibility as a core value of the company. It heavily markets the fuel efficiency of its models, like the Passat and GTI, to U.S. buyers, and the company cited Chattanooga's "strong environmental commitment" as a factor in winning the plant.

Kisber and Bredesen said the officials were also intrigued by the state's unified pitch from state and local governments and Republican and Democratic officials.

The cooperation was crucial when a Volkswagen executive advised state officials that the potential plant site "looks like a forest and ... it needs to look like a site" before company executives returned.

The next morning, city and county public works officials began clearing trees at the site a former World War II Army ammunition plant with no tenant before Volkswagen. A webcam was installed so VW officials in Germany could monitor cleanup progress via the Internet.

"The only thing we didn't do was bring in the National Guard with their heavy equipment down there, but that would've happened in the last week if we had to," Bredesen quipped.

Tennessee's incentive package had been a sticking point in recruitment efforts before Volkswagen. The same Chattanooga site was runnerup to Mississippi for a new Toyota plant last year, and Bredesen said then that Mississippi's incentives were more generous.

Tennessee state law provides for a $5,000 corporate tax credit for each new employee brought to the state in large industrial projects. Those credits last up to 20 years for investments of at least $1 billion and 1,000 new jobs.

Bredesen and Kisber wouldn't detail how they retooled the Volkswagen incentive package. The state hasn't yet announced the total cost of the incentives, saying it depends on the plant's design and the infrastructure needed for it.

Tennessee got its first foreign auto investment in the 1980s when Nissan began making pickups in the Nashville suburbs a relationship the state recently parlayed into a deal for the Japanese automaker's North American headquarters. As he pursued the Volkswagen plant, Bredesen considered what it could mean to Tennessee years or even decades from now.

Volkswagen recently became the third largest car company in the world and has ambitions of rapidly moving up.

"America is their largest market," Bredesen said. "They're willing to make this their flag in North America. Well, that's something worth going for."