Volkswagen announced late last month that it has narrowed down its possible U.S. plant locations to Michigan, Tennessee and Alabama, but it looks as though one state might have the upper hand. If VW’s decision comes down to incentives, Alabama will likely win the U.S. assembly plant.
With Michigan the long shot of the trio, VW’s decision will likely be between Tennessee and Alabama. Both states have a history of luring automakers, but Alabama has the advantage when it comes to offering companies incentives.
Alabama landed its first auto plant in 1993 — a Mercedes-Benz facility in Tuscaloosa — and has since acquired a Honda and Hyundai plant, along with a Toyota engine plant. However, those automakers didn’t just pick Alabama out of a hat — the state offered Mercedes, Honda and Hyundai a combined $664.5 million in public funds, according to the Tennessean.
Just north of Alabama, Nissan and General Motors call Tennessee home. Nissan opened its Smyrna plant in 1980 followed by GM’s Saturn plant in Spring Hill in 1985. To lure those two projects, Tennessee only offered a combined $95.6 million.
However, Tennessee most recently gave Nissan $197 million in incentives to move its U.S. headquarters from Los Angeles to Nashville and also pledged $35 million to retrain workers at GM’s former Saturn plant. The Spring Hill facility closed in March 2007, but will soon reopen to build the Chevrolet Traverse crossover.
But Alabama isn’t one to shy down from a major investment to lure large companies. In 2007, the state gave German steel maker Thyssen-Krupp $811 million to setup shop just outside of Mobile.
“ Volkswagen has not yet told us what they need” in the way of incentives, Development Office Director Neal Wade said. “But when they do, we’re ready to give them what they ask for.”
So while Alabama has a clear advantage in incentives, Tennessee might be able to fight back with other factors. “Incentives are usually not the driving factor,” University of Tennessee economist Bill Fox told the Tennessean. “Companies usually focus more on such issues as the available labor force, transportation access and other factors related to the specific site.”
VW’s proposed site in Chattanooga was once home to the Volunteer Army Ammunition Plant, so Tennessee might actually have the advantage in available work force. In addition, Tennessee also offers lower taxes than Alabama.
It is expected that VW will announce a location for its U.S. plant by July.
