The smog was so bad people drove with headlights on during the day. Walter Cronkite, in 1969, called it “the dirtiest city in America.” The so-called Scenic City was nationally renowned — for all the wrong reasons.
City fathers were not amused. They vowed to scrub clean Chattanooga’s reputation and, in the process, build a new economy.
They succeeded. Chattanooga today is gigabits, high-tech manufacturing and the natural beauty of the Tennessee River and the Cumberland Plateau. Outside magazine called it one of the best cities “ever.”
Volkswagen fueled the Chattanooga mystique, opening a robot-filled, environmentally friendly factory on the outskirts of town in 2011. Passats with “clean diesel” engines rolled off the assembly line and into the garages of drivers enamored with German-engineered precision and greener-than-usual cars.
Yet last month’s admission by VW that it had willfully installed deceptive emissions control systems in 11 million cars — 500,000 in the United States — tarnished more than the automaker’s reputation. Chattanooga’s newfound identity received a black eye, too.
Locals expressed shock, anger, disappointment, embarrassment, frustration — the whole gamut of emotions when a celebrated neighbor turns out to be a con artist. Many felt they’d been taken for a ride, especially with the nearly $1 billion in tax breaks and other incentives given to VW by state, county and local governments.
“Everybody was delighted when VW chose Chattanooga, but people are angry now and feel betrayed by Volkswagen’s criminal activity,” said Helen Burns Sharp, a community activist and Cobb County’s planning director in the late 1980s. “The average person doesn’t know how invested Chattanooga is in VW. What they do has a ripple effect all over. We hope they’ll be able to turn things around.”
Sharp and others, though, fear layoffs or worse. VW closed its first U.S. factory in 1988. With the automaker facing federal penalties totaling $18 billion, lawsuits likely to cost billions of dollars more and engine fixes that will add additional billions, Chattanoogans wonder whether the Germans won’t pull the plug on their second American factory.
The company employs 2,400 in Chattanooga and is building an SUV production line for an additional 2,000 workers. A research center is planned with the promise of 200 more good-paying jobs. A university study pegs the number of direct and indirect workers dependent upon VW at 13,000 — many currently sweating bullets over an uncertain future.
VW says no layoffs are planned. Bo Watson isn’t satisfied. He’s a state senator representing Chattanooga who’ll lead an Oct. 29 hearing where VW executives will be asked what’s going on and whether the state’s billion-dollar investment is sound.
“VW needs to come clean. The brutal fact is they cheated,” Watson said. “But I believe they can transform themselves by building the SUV in the most transformative city in America — a city they helped transform. It’s a great narrative.”
‘The ideal marriage’
Chattanooga was a good match for VW. Transportation is in its DNA, with rail lines once converging at depots near the Tennessee River. Manufacturing was the region’s livelihood, as the mills, foundries, Coca-Cola bottling plant (the world’s first franchise) and tow-truck maker (ditto) molded generations of Chattanoogans.
It mattered little to VW’s leadership that the site for their $1 billion plant was built upon an old munitions factory that made bombs dropped on Germany during World War II. The Germans announced in July 2008 that Chattanoogans would build the cars expected to help triple U.S. sales.
Tennessee officials were giddy that Chattanooga bested sites in Georgia, Alabama and Michigan. U.S. Sen. Lamar Alexander said VW and the city were “the ideal marriage.” Tennessee’s other senator, Bob Corker, said VW “represents a new chapter in Chattanooga’s success story (and) will take us to levels we can only begin to imagine.”
No kidding.
VW admitted last month to illegally rigging software that would lower emissions on diesel engines when tested. Eleven million cars and trucks spewed up to 40 times the amount of federally allowed tailpipe pollution into the air.
VW ordered dealers not to sell any 2015 diesel-engine cars and delayed delivery of 2016 diesels due to new questions about rigged emissions software. The company has set aside $7 billion to fix the cars in Europe (but nothing for U.S. cars). Violations of the Clean Air Act could cost VW up to $37,500 per vehicle, or $18 billion, in the U.S. alone. More than two dozen class-action lawsuits have been filed against the automaker.
Attorneys general in 30 states, including Georgia and Tennessee, have launched investigations. VW’s chairman resigned. His replacement said the scandal is “an existence-threatening crisis for the company.”
“I expect that over the next six months or so VW’s board will focus on maintaining jobs first and foremost in Germany and they will spread out the job loss and production throughout their facilities outside of Germany,” said Bruce Hutchinson, an economics professor at the University of Tennessee at Chattanooga. “I expect a loss of jobs at the Chattanooga facility.”
VW has already told German workers to prepare for job cuts, but it hasn’t mentioned any layoffs here. The company says plans for the SUV remain on track.
“The Chattanooga factory continues to operate as normal,” VW spokeswoman Jeannine Ginivan said in a statement.
VW struggles to sell cars in America. Car sales for the German automaker have dropped 2.5 percent this year; the rest of the industry witnessed a 5 percent uptick. Hutchinson, who taught at Emory University in the late ’70s, said car buyers now have more reasons to avoid VW.
“It really could have a ripple effect,” Sharp, 69, said during an interview at the Mean Mug coffee shop downtown. “If Volkswagen slows down, the suppliers and others will, too. Everybody is worried about the security of their job.”
Commitment questioned
Sharp, though, is also worried about money. State and local taxpayers gave VW $900 million in various tax breaks, incentives and land to lure the Germans here and to help them expand. VW is investing an additional $600 million in Chattanooga to build a seven-passenger crossover, adding 2,000 jobs.
“We needed to give them an incentives package, but we didn’t need to give them the sun, moon and stars,” said Sharp, whose Accountability for Taxpayer Money group includes Democrats and tea partyers. “You hope they honor their commitments, but what happens if VW cuts back on production or, heaven forbid, closes this plant?”
State officials say VW has already spent half of the money it promised and lived up to job commitments. A factory closure, though, could scuttle the agreement and require VW to repay some incentive money. Legislators will question VW and state officials over the possibility of “clawing back” cash if production falters.
“We need to be a steady partner, but that doesn’t mean we don’t hold them accountable in terms of keeping commitments to the citizens of this state,” said Watson, the state senator.
Volkswagen, until now, has been considered a stalwart public citizen. The Germans plan a visitor center along the river in a much-revitalized downtown. They sponsor the local soccer team, bike races and festivals. VW will pay nearly $5 million in school taxes next year.
The automaker has also played a critical role in transforming Chattanooga’s image, adding a high-tech, continental flair to the once-dirty and dowdy town. Bill Kilbride, who runs the chamber of commerce, says the recent troubles won’t harm Chattanooga’s resurgence.
“I don’t think people wake up in the morning and say, ‘Gee what’s happening with Volkswagen today?’ Life goes on here,” he said. “No one in Chattanooga feels like we’re getting a black eye.”
About the Author
