VW Exec Pledges Green Partnership With Tennessee

German automaker promises vehicle fuel efficiency and emissions innovations in its products, including a new sedan being designed for American consumers to be built in Chattanooga.

KNOXVILLE, Tenn. (AP) -- Volkswagen Group of America's top executive said Tuesday on the opening day of a clean energy summit that Tennessee can count on VW as an environmental partner and Gov. Phil Bredesen promised Tennessee will fulfill its economic incentives to the automaker despite tough economic times.

"I think everybody is affected by the economic crisis, which is now a global crisis," VW America's CEO Stefan Jacoby said. However, he said Volkswagen as a group is "very well prepared" with fuel-stingy offerings and its plans for a 2,000-employee, $1 billion factory to open in 2011 in Chattanooga are "actually on time."

The German automaker promises vehicle fuel efficiency and emissions innovations in its products, including a new sedan being designed for American consumers to be built in Chattanooga that likely will offer both gasoline engines and diesels.

"We're here to stay. We're here to be a partner," Jacoby said of the Tennessee location, which will likely attract VW suppliers.

Jacoby said VW is generally satisfied with the U.S. financial bailout to improve credit, though "a lot of things have to be done further" and VW foresees a continued slump in U.S. auto sales at 13 million to 14 million total units annually into next year.

The state and local governments offered a $577 million incentive package to lure VW to Chattanooga. Although Tennessee is having to make large budget cuts to offset declining tax revenues in the current economic downturn, Bredesen said the state "is committed to going forward with the incentives to Volkswagen."

The governor said Tennessee is wrestling with "a number of budget issues," but it still has rainy day fund reserves that can be tapped and he is confident the situation can be managed.

Instead of retreating, Bredesen said the state needs to "take advantage of these economic times to be very competitive and to help bring not only the Volkswagens but some of the ancillary business" here.

Bredesen, former U.S. Sen. Howard Baker and the University of Tennessee's Baker Center for Public Policy are host for the summit. It is aimed at developing strategies for Tennessee to be a leader in technologies such as energy-efficient lighting, alternative fuels and renewable sources like solar and wind.

Jacoby said the Chattanooga plant has been designed to reduce energy consumption and will use environmentally friendly refrigerants in the air conditioning system. He said the plant near Interstate 75 will have a wetland near the entrance and that area streams will be preserved.

"And it will limit environmental impacts at every step of the manufacturing process," Jacoby said.

Jacoby said VW is focused on environment globally, not just in Tennessee.

He said the company in the short term is working to "get maximum efficiency from gasoline and diesel engines," is refining hybrids and is "perfecting a diesel hybrid that uses an electric motor as the main source of propulsion."

"Longer term, we're at the forefront of efforts to develop a zero-emission hydrogen fuel cell car," he said.

Jacoby said VW has shared interests with the nearby Oak Ridge National Lab, such as work on cleaner diesel and "researching carbon-fiber vehicles, which would include materials made from wood pulp and cellulose."

Associated Press Writer Bill Poovey in Chattanooga contributed to this story.

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