Volkswagen May Not Build SUV at Chattanooga Plant After All

Volkswagen has alternative deals for building their much-anticipated SUV, and Tennessee officials are not making the state look any more attractive with their negotiation tactics.

In an email to the state Department of Economic and Community Development on January 27th, Volkswagen attorney Alex Leath confirmed that the company has secured alternative deals to build a new SUV outside of the current VW plant location in Tennessee. Volkswagen warned Tennessee officials that these offers could take them to other locations rather than expand the German automaker’s single U.S. plant. But, negotiations over incentives have continued to be difficult.

Leath said in the email, released to the AP, that the Volkswagen board would be presented with options to build the SUV either at the existing plant in Chattanooga or choose from “alternative sites outside of Tennessee.” But, Tennessee’s $300-million incentive offer to expand the Chattanooga plant has continued to complicate the issue with Republican politicians’ opposition to the United Auto Workers campaign to unionize workers there. Leath said:

While we understand there are some ‘non-deal’ issues that are causing a delay in the TN solution, VW has been successful in reaching agreement on terms at the alternative locations.

Why would union involvement complicate matters of negotiations in this situation? Volkswagen is seeking to create a German-style works council at the plant, which would represent both hourly and salaried employees. However, for this development to go forward, the involvement of an independent union is required.

As those following the Tennessee-Volkswagen situation are aware, Republican leaders in the state have been fiercely opposed to the UAW making its way into the Chattanooga plant, their argument being that if the union gets a foothold with Volkswagen, it would make it harder for Tennessee to attract other manufacturers and buyers, possibly decreasing the long-term benefits of the plant for the state. Thus, before the plant held its vote in February, there were warnings that the state legislature may reject incentives if the union was voted in at the plant. When the vote came down, the UAW lost 712-626, prompting an appeal by the UAW, citing outside interference with the plant workers affecting the vote. However, that appeal to the National Labor Relations Board was dropped this Monday, and the UAW urged the state to approve the incentives.

But, on Thursday it was reported that the $300 million incentive deal was off the table, and Commissioner Bill Hagerty said in an email that changing circumstances had led to the state revoking the offer. The exact circumstances were not detailed, but Hagerty did say that he was looking forward to “renewing our dialogue and determining the appropriate level and terms of state support for this important project.”

It appears this important project is in danger of leaving the building.

Image: Cambridge Square

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