Sunday, August 3, 2008

Tennessee shows Herbie the love, but have they considered all the costs?

Look out Rocky Top, that automotive icon of the 1970’s (yes, there was a lovebug before Lindsey Lohan) is on his way. Ok, so maybe not Rocky Top exactly, but the state government has lured German auto manufacturer Volkswagen to the Volunteer state by offering up some $600 million in economic aid. Yes, you read that right, $600 million. VW announced that it will build a $1 billion manufacturing facility in Chattanooga and all it’s going to cost the state is a mere $600 million*. This will reportedly be one of the biggest incentive packages ever offered to a car manufacturer.

The economic impact that the plant will have on the state of Tennessee is estimated to be profound. Sure, the state, as well as Hamilton County and the city of Chattanooga will forego millions of tax dollars over the life of the incentive package. But I’m here to tell you that I believe the incentive package will be worth the monetary costs in the long run.

In the current state of the economy, Tennessean’s should be shouting from the rooftops about a major automobile manufacturer building their first U.S.-based manufacturing plant in-state. We’re not talking about the gas-guzzling SUV’s that have seen sales drop dramatically in the last couple of years. We’re talking compact and mid-sized automobiles, the ones that are relatively kind to your wallet at the gas pump. VW has said it expects to produce 150,000 cars a year at this facility once it reaches capacity.

The real question in my opinion is the environmental impact the facility will have on the local community in Tennessee and on neighboring states Georgia and Alabama (*Maybe $600 million is a conservative cost estimate since it may not take into account the environmental impacts). Sure, the monetary concessions the state will make are relatively transparent, but what is much more difficult to measure are the long-term impacts the plant will have on the surrounding environment. We know that the benefits of Tennessee’s offer to VW include an estimated 2,000 new jobs. But what regulatory stances have been made regarding the environmental issues associated with any $1 billion assembly plant? Surely the plant will create higher emissions in east Tennessee, but will they use proper abatement methods to alleviate some of the negative effects of pollution?

While I believe the economic impact on the state will be overwhelmingly positive, it will be many years before the reality of the full impact will be known. For now, we can only hope that Governor Bredesen proceeds with caution if future firms become interested in locating in Tennessee. While I am all for the high spirits associated with the economic boost that VW’s (and Herbie’s) recruitment will bring to the state of Tennessee, I hope that we aren’t taken advantage of (environmentally speaking) by attracting the environmental consequences that could be associated with other expensive assembly plants in the future.

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