Industrial traditions (3) Cars and titanium

Usually a city can owe its industrial basis to a entrepreneurial population or to the arrival of external entrepreneurs. Even when most of the western countries have most of their jobs and revenues generated by small and mid-size businesses, what moves the newspapers titles is the ability of a city to lure large, well known firms, to come to their place to invest.

When it comes to Chattanooga, the largest recent such investment is by Volkswagen, who built the production line for the American version of the Passat. The investment was announced in 2008, with the following figures (this is the most detailed news I have had, even if they do not describe the final deal ):

–           1 billion dollars in Volkswagen investment

–           More that 500 million dollars in public aids:

  • 81 million in real estate
  • 30 million for worker training
  • 43 for public works (roads and highway connections)
  • 3,5 for rail line improvements
  • 200 million in job tax credits over 20 years
  • 150 to 350 million in property tax breaks over 30 years

–           2.000 direct jobs

–           546 hectares (1.350 acres) of land in a location 12 miles from Chattanooga, on an industrial area which is the result of a decades-long work by local authorities to reclaim a former ordnance factory

The factory opened its gates in 2011. In February 2014 it has been the centre of a strong debate on unions, something in Europe would sound rather strange; in fact, Volkswagen was (according to the press) not opposed, but it was rather an American right-left battle waged as a part of a larger conflict in the south. To an European eye it is puzzling to see Tennessee republican legislators accuse Volkswagen (a private company) of favouring a given union and threaten to remove incentives if that union was to win ( ).

Titanium clad: Guggenheim Bilbao

Titanium clad: Guggenheim Bilbao

In Bilbao, the investment in the Guggenheim shows parallels. The incentives given to ensure the presence of the Guggenheim museum can only be understood taking into account that the Provincial Government of Biscay has a special fiscal regime, on equality with the Spanish tax agency (and clearly because Biscay is a rich province).

How do you attract a large brand, whose image is far from the one your city currently sports? By looking for a brand that wants to widen its scope, and providing advantages: a good location, a coherent city project to grow… and consequent public help. Seen from the other side, if the project works, there are chances for synergy for other business in the area, even if there can be exclusivity agreements (Eurodisney in Paris, for instance) on some zones; but these benefiting from the synergies will have to pay full taxes.

To be sure, during the XIXth century, there were not such aids; but taxes were lower, as much as environmental protection and other things now judged as unavoidable. To which extents do such deals are fair and acceptable? In a democracy, transparency must be there, and election votes should be relevant, but there is a need to hear the citizens during negotiations.

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