Volvo Makes Promise Congress Can’t Keep

Pennsylvania's Department of Community and Economic Development acknowledges Volvo's "significant economic contribution" to the state, but points out that job creation projections have not been met.

📅   Wed June 17, 2015 - National Edition
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A machine show followed the ceremonial ribbon-cutting for Volvo’s new Customer Center back in 2014.
A machine show followed the ceremonial ribbon-cutting for Volvo’s new Customer Center back in 2014.

State officials are withholding tax credits and pursuing a partial payback of grant funds from Volvo Construction Equipment in Shippensburg, according to the website Public Opinion Online.

Lyndsay Kensinger, spokeswoman for Pennsylvania’s Department of Community and Economic Development, acknowledged in an email this week that "Volvo has not met the obligations of the initial agreement with the state, and DCED is in conversation with the company regarding reimbursement."

In response to questions, Kensinger elaborated Friday, saying, "Based on Volvo’s commitment to create 300 new full-time jobs within three years and make a capital investment of more than $40 million in the project, DCED provided an offer of assistance including grants, loans, and training dollars in 2012. Upon monitoring of the project it was determined that Volvo did not meet the initial requirements and fell short of the creation of 300 new jobs. DCED has requested partial reimbursement of the grant funds in the amount of $205,000 and will not issue $369,00 in tax credits; and committed training dollars have not been fully dispersed."

Volvo is appealing the action, according to company spokeswoman Meg Dameron.

Dameron said one condition of the Pennsylvania First Grant was to create 300 new full-time employees by the end of 2014. The grant was targeted to assist with expansion linked to Volvo’s consolidation in Shippensburg of its North American operations. The goal of 300 new employees was unfulfilled, Dameron said. However, Volvo expanded its office and manufacturing facilities and constructed a new customer center and test facility.

Dameron said DCED acknowledges Volvo’s "significant economic contribution" to the state, but points out that job creation projections have not been met.

"Because of that," Dameron said, "DCED has asked for a small portion (of the grant) back." She opted not to speak in specific numbers, but said the requested payback is "less than a quarter" of the $1 million.

Dameron said Volvo officials are negotiating the state’s request.

"They (DCED) have a standard appeal process," she said. "We appealed that our overall capital investment and trickle down affects offset the lower than expected job creation. We have a lot of contractors (temps) and paid interns and have a lot of localization of suppliers."

She said Volvo employs about 1,000 full-timers at the Shippensburg plant -- which is more than the 829 full-time employees on board at the time of 2012 grant award.

However, VCE announced an incremental layoff in November 2014 that was projected to idle 15 percent of the plant’s employees by mid-2015. The company has eliminated production of some product lines at the Shippensburg plant.

Dameron attributed slow job growth to continued sluggishness in the economy and the failure of Congress to approve a long-range transportation spending plan.

"The global equipment market has not performed as predicted," she said. "The failure to approve a long-term highway bill has dampened highway and bridge construction."

She said Volvo’s customer base is composed of infrastructure builders who delay equipment reinvestment in the face of uncertainty linked to short-term federal highway bill extensions.

Mike Ross, president of the Franklin County Area Development Corporation is in Volvo’s corner in the argument to minimize any punishment.

"Volvo’s investment is far beyond expectation," he said.

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