V-Vehicle plant to employ 1,400 by 2011

• Advocate staff report
• Published: Jun 19, 2009 - Page: 5A

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The V-Vehicle Co. auto plant in Monroe would reach employment of 1,400 by 2011 with an annual payroll of $56 million.

Workers would average $40,000 plus benefits in the agreement reached this week between VVC and the state of Louisiana.

The state, with $69 million, and local governments, with $15 million, have much at stake in their commitments to the automotive company, with a potential $19.6 billion in total economic benefits expected from the automotive venture over the 15-year life of the cooperative endeavor agreement.

Here are highlights of how the state is trying to protect its investment:

Phase I funding
Louisiana will release about $2 million early on to enable site preparation to begin at the former Guide Corp. plant in Monroe. VVC and the state also hope to obtain a $5 million federal Department of Commerce  grant for a rail spur, paving, drainage and other infrastructure work.

Phase II funding
When VVC delivers proof of $50 million in equity financing for the project, Louisiana will put another $10 million into site improvements that would be appropriate for any manufacturing site, automotive or not. Louisiana also would begin development of a custom training solution through its FastStart program, investing $2 million over the life of the project to screen and hire the 1,400 employees.

Phase III funding
When VVC confirms project financing of $350 million by a March deadline, Louisiana would release the final $55 million for rebuilding the Guide plant.

Clawbacks
The above state grants, excluding the $2 million for FastStart, are performance-based. So Louisiana would be reimbursed if VVC fails to meet annual goals for required taxable purchases or payroll. For example, by 2024 the company is expected to pay $75.2 million a year in wages, excluding benefits, and to make $22.9 million in taxable purchases in the state.

VVC would be required to pay 12.4 percent of a shortfall between the actual payroll and the required payroll. It would pay 3.8 percent of a shortfall between actual taxable purchases and required taxable purchases. Those amounts would cover lost tax revenue for the state.

Also, if VVC doesn’t make the required capital investment of $248 million (which includes state and local matches) by Feb. 1, 2011, there’s another clawback. VVC would reimburse Louisiana 2.3 percent of any shortfall between the $248 million capital investment and actual capital investment — again, to cover lost tax revenue.

Grant payback
VVC is obligated to begin commercial operations in the Guide building (full car production may ensue later, in early 2011) by Oct. 1, 2010. If it doesn’t, or if it later ceases operation, or if it transfers most of the plant’s assets to another owner not approved by the state, the agreement between VVC and the state is terminated for cause.

In that scenario, VVC would be legally bound to repay all $84 million of the state and local investment in 2010. And the amount owed to state and local governments would decline over the years, taking into account benefits gained from VVC’s operation.

For example, state and local governments would be owed $71 million in year five, if the agreement is terminated; $37 million in year 10; and nothing after 15 years.