ARI SHAPIRO, HOST:
Volkswagen has one plant in the U.S. It's a billion-dollar facility located outside Chattanooga, Tenn. It started cranking out cars in 2011 with a lot of financial help from the state government. And now with this scandal, lawmakers worry that their investment is in trouble. Blake Farmer of member station WPLN in Nashville has that story.
BLAKE FARMER, BYLINE: When it comes to corporate subsidies, Volkswagen is one of the biggest recipients in Tennessee. Taxpayers coughed up more than a half-billion dollars for initial construction of the automaker's plant. With 1,500 direct jobs and thousands more suppliers, Republican governor Bill Haslam told reporters there's a lot riding on the automaker's success.
BILL HASLAM: Volkswagen is somebody that is a major partner for us in the state of Tennessee both in terms of investment and the jobs created. We're obviously very interested in their continued growth, but they're going to have to address this issue.
FARMER: This has been more than a straight business transaction, though. State leaders hailed VW as a model employer and highlighted its eco-friendly attitude. They had reason to believe it was sincere. The company's plant, tucked into rolling green hills, is powered in part by a vast solar farm. The rooftop was engineered to collect rainwater. The sprawling facility even achieved platinum LEED certification for its low environmental impact.
BO WATSON: We have been guilty of putting them on a pedestal, and that's always a dangerous thing to do.
FARMER: Tennessee state senator Bo Watson's district includes the plant. He's officially requested Volkswagen executives appear before state lawmakers at a hearing.
WATSON: When you're caught committing fraud, it makes your partners question everything else that you've done.
FARMER: The Chattanooga plant builds the Passat sedan, which hasn't been selling well anyway. The one bright spot had been the fuel-efficient diesel version. Former VW America CEO Jonathan Browning touted this point in a promotional video last year.
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JONATHAN BROWNING: One of the incredible things about the Passat for the U.S. market is it's the only clean diesel TDI offered in the midsize segment.
FARMER: Now VW can't sell any of them. The union representing a majority of the plant's employees declined to comment and has instructed its members to do the same. Justin King, who worked for VW until July, says he anticipates the company will find a way forward, but he's concerned for his former colleagues.
JUSTIN KING: Because it was better than 40 percent of our production of Passats were diesel engines because it was such a popular engine. And you got to wonder, you know, what is that going to do to our sales?
FARMER: Volkswagen is also facing huge fines. Estimates range as high as $18 billion. Tennessee representative Marsha Blackburn, who's vice chair of the House Energy and Commerce Committee says VW should be punished. But she also doesn't want to threaten the company's viability.
MARSHA BLACKBURN: All fines should be appropriate for the damage that has been done, and it just seems a little bit of a heavy-handed fine when you look at that dollar amount
FARMER: It's a case in which the government acts both as a regulator and investor. And Tennessee's fortunes have only become more intertwined with VW's in recent weeks. Just this month, Tennessee approved $168 million to help the automaker build a second line at the plant for a new SUV. Company executives have assured local officials that the expansion is still a go for now. For NPR News, I'm Blake Farmer in Nashville.
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