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I-Team: Cashing in on car makers

Digging Deeper: What Huntsville can learn from the Volkswagen plant we lost in 2008

Posted: Feb 1, 2018 10:13 PM
Updated: Feb 2, 2018 7:32 AM

Cashing in on car makers is something most every state wants to do.

WAAY 31's I-Team took a trip to Tennessee to dig deeper. A decade ago, Alabama may have lost Volkswagen to Chattanooga. Now, though, there’s plenty to study about VW’s impact there.

Volkswagen Chattanooga Assembly Plant

Hundreds of VW Passat sedans and Atlas SUV's are staged outside the Volkswagen Chattanooga Assembly Plant where its 3,400 employees manufactured the vehicles.

Dozens of rail cars are lined up waiting to transport VW Passat sedans and Atlas SUVs to dealers.

Putting a price on progress and its payoffs can be challenging to calculate. In the case of the Toyota-Mazda joint venture’s auto assembly complex coming to our area, that price tag is pushing three-quarters of a billion dollars in tax breaks.

Is it worth it? And what’s the payoff?

WAAY 31 has an in-depth look at how Toyota-Mazda here in North Alabama might compare to a nearby auto assembly operation.

Alabama's still celebrating Toyota-Mazda’s decision to invest $1.6 billion to build cars and crossovers in the southeastern tip of Limestone County. That’s the part of Limestone where Huntsville has extended its city limits.

But across the state line, Tennessee started celebrating ten years ago. That celebration came at Alabama’s expense.

In 2008, Volkswagen chose Chattanooga as the site for a $1 billion plant to build VW Passats.

"The state of Tennessee was very aggressive in pursuing Volkswagen," Mike Pare told WAAY 31. Pare is Deputy Business Editor at the Chattanooga Times Free Press.

Pare covered Chattanooga’s courtship of Volkswagen from the beginning.

What did Tennessee give up?

"A tax incentive package,” Pare explained. “About $554 million in local, state and federal incentives that went to Volkswagen.”

A $554 million record. It was history-making in 2008. That’s until Alabama’s deal with Toyota-Mazda this year.

“Huntsville announced they were giving up about $700 million worth of incentives,” Pare told us.

‘Our issue has been with the incentive package that we offered,” Helen Burns Sharp told WAAY 31. Sharp founded the public advocacy group Accountability for Taxpayer Money. “We believed there needed to be incentives given the competition including, I believe, with Huntsville back then.”

Sharp says Volkswagen is a net positive for Chattanooga. But she questions if more than a half-billion bucks in tax incentives is worth the price.

"We gave them the sun, the moon and the stars. Maybe, the sun and the moon might have sufficed."

And Sharp wonders, who’s advocating for the public interest?

"In other words, for wages for our employees, for trying to tighten the package as much as possible and for making it, like transparency, there's not much in the way of reporting requirements,” Sharp told WAAY 31.

Back at the Chattanooga Times Free Press, Mike Pare told us, "I'd say they've delivered on their promises.” The newspaper says it's holding Volkswagen’s feet to the fire. And Pare believes, so far, VW has held up its end of the deal.

"They've got about 3,400 employees now,” Pare said. “Those are good jobs. Excellent benefits. It's a world class company.”

Already, the German auto maker has more than doubled in size and nearly doubled its workforce in Chattanooga. VW expanded the plant to produce a new midsize SUV.

The VW Atlas started rolling off the assembly line it shares with the Passat in December 2016. Volkswagen invested another $900 million for that second phase. And the jobs inside the VW plant aren’t the only ones producing paychecks.

"Auto assembly plants tend to have a big multiplier effect,” Pare said. “You know, they not only have the jobs that they create there, but also the supplier jobs. And there are companies who support the suppliers. So, there's a big economic ripple to auto assembly plants."

The expansion’s multiplier effect added, in total, another 9,799 jobs according to a study by the University of Tennessee. UT says that’s on top of the 12,400 direct and indirect jobs created before VW’s Chattanooga expansion.

Volkswagen’s total investment is now comparable to what Toyota-Mazda is committing to spend in Limestone County and Huntsville.

But there’s expected to be hundreds more jobs inside the Toyota-Mazda plants and hundreds more in spinoff jobs for North Alabama.

“Twenty years from now, I don’t think you’ll recognize that area,” David Seibert told WAAY 31.

Seibert helped put together Limestone County/Huntsville’s bids both for Volkswagen and Toyota-Mazda.

He was county commission chairman when he tried to convince VW to call Limestone County home. Now, Seibert is coordinator for the commission’s economic development efforts.

We asked if $700 million is too high a price to have Toyota-Mazda in Alabama?

“They’re going to start at 4,000 initial jobs,” Seibert said. “And then you have the construction workers. And then you have the suppliers. And then you have all the retail. I don’t know how you’d predict it.”

Unlike Alabama, Tennessee has no income tax. So, here, Alabama will take in income tax money from Toyota-Mazda employees who live in-state.

That's one payback Alabama gets that Tennessee misses out on.

In Tennessee some critics don't like the 30 years of property tax forgiveness VW is getting. They say that's money that should be going to libraries, parks and public safety.

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