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VW to stop making iconic Beetle next summer

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DETROIT — After selling it on and off in the U.S. for nearly seven decades, Volkswagen has decided to squash its iconic Beetle.

The company’s American unit announced Thursday that it would end global production of the third-generation bulbous bug in July of next year after offering two special editions for sale.

The compact Beetle was introduced in Germany in 1938 during the Nazi era and came to the U.S. 11 years later, where it became a symbol of utilitarian transportation often used by hippies. The iconic car sold for about 30 years before U.S. sales stopped in 1979. The last of the original bugs was produced in Puebla, Mexico, in 2003.

Volkswagen revived it in the U.S. in 1998 as a more modern “New Beetle,” but it attracted mainly female buyers. The company revamped it for the 2012 model year in an effort to make it appeal to men, giving it a flatter roof, less bulbous shape, a bigger trunk and a navigation system. U.S. sales rose fivefold to more than 29,000 in the first year, rising to just over 46,000 in 2013 but tailing off after that. Last year VW sold only 15,166, according to Autodata Corp.

The special editions, which come in coupe and convertible body styles, get unique beige and blue colours in addition to the normal hues. They also get standard extra chrome, new wheels and three-colour ambient lighting inside.

Volkswagen has no immediate plans to revive the Beetle again, but the company wouldn’t rule it out.

“I would say ‘never say never,”‘ VW of America CEO Hinrich Woebcken said in a statement.

The company plans to roll out an electric version of the old Bus in 2022 called the I.D. Buzz.

——–

This story has been corrected to include the convertible model in Beetle sales figures.

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What Amazon's HQ2 means for taxpayers in New York and Virginia

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Winning the bidding war for Amazon’s

AMZN, -0.35%

 second corporate headquarters came with a steep price tag — $3.4 billion.

That’s the total amount in tax incentives and grants that state and local officials in New York and Virginia offered the tech giant as part of their bids to house HQ2 in Long Island City, N.Y., and Arlington Country, Va., respectively.

Amazon confirmed Tuesday that it had selected those two locations from its short list of 20 cities across the U.S. and Canada, ending a bidding process that took more than a year.

“What we’ve seen play is one of the most public site-selection processes in recent years,” said Jared Walczak, a senior policy analyst with the Center for State Tax Policy at the Tax Foundation. “Taxpayers are getting a look under the hood at the sorts of negotiations that happen every day.”

This is far from the first time Amazon has received a massive payout from state or local government officials. Before the HQ2 announcement, Amazon had received roughly $1.61 billion in subsidies from state and local governments over roughly the past two decades, according to data collected by Good Jobs First, an advocacy group that tracks corporate accountability.

These subsidies were used to persuade Amazon to build distribution facilities, data centers, regional headquarters and Whole Foods supermarkets, among other job sites.

Will taxpayers benefit from HQ2?

When it announced its selections for HQ2, Amazon played up the benefits residents of Long Island City and Northern Virginia will receive as part of the deals. In New York, Amazon will create space on its campus for a tech start-up incubator and for artists and industrial businesses, donate space for a public school and invest in infrastructure and green spaces.

Moreover, proponents of the plan point to the expected boost in tax revenue courtesy of the 50,000 Amazon workers earning an average wage of $150,000 annually — plus the countless other workers lured to these cities thanks to the additional companies and jobs that could follow Amazon.

But critics of the HQ2 plan argue that these benefits will be hard to come by thanks to the large size of the tax breaks and grants Amazon itself is receiving. “Taxpayers should be very skeptical that incentives like these will ever pay for themselves,” Walczak said.

‘If you focused on creating a more competitive business tax environment rather than targeting one white whale, you would have a much better system overall and, frankly, it would probably create more than 25,000 jobs.’


—Jared Walczak, a senior policy analyst with the Center for State Tax Policy at the Tax Foundation.

Instead, Walczak argues that residents and local businesses would benefit more from overall tax reform rather than huge tax breaks for individual companies. “When states pick a particular company and throw money at them, someone has to pay for that and you’re foregoing other opportunities,” he argued. “If you focused on creating a more competitive business tax environment rather than targeting one white whale, you would have a much better system overall and, frankly, it would probably create more than 25,000 jobs.”

However, the majority of the tax breaks and grants Amazon will receive are contingent on the company fulfilling its promises regarding hiring and occupying commercial real estate.

To that end, the offers Amazon accepted from New York and Virginia were “set up in the least harmful way,” Friedfel said. These requirements prevent Amazon from reaping the benefits of the incentives and then simply abandoning ship.

Some have argued that the online retailer was always primed to pick New York City and the Washington, D.C. area since Amazon founder Jeff Bezos owns homes in those locations. As Politico had previously reported, Google

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 and Facebook

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 both opened large corporate offices in New York City without getting state tax breaks. (Facebook confirmed to MarketWatch that it received no incentives; Google did not return a request for comment.)

In the long run, the battle over HQ2 could have serious ramifications for taxpayers, if other companies choose to replicate Amazon’s process. However, Walczak said the unusually open process Amazon promoted for HQ2 also meant that Americans were given the chance to scrutinize the terms of the offers lawmakers made.

Already, the deals in Northern Virginia and New York have garnered some backlash from two Democratic lawmakers, New York City Council Speaker Corey Johnson and incoming Representative Alexandria Ocasio-Cortez. “That might cause elected officials to consider deals like this more carefully,” Walczak said.

Here’s how the HQ2 incentives break down

For the Long Island City location, Amazon will receive $1.2 billion in refundable tax credits through New York State’s Excelsior Jobs Program, which will be distributed if the company creates 25,000 net new jobs in New York State by the end of June 2028. New York State has also promised a $505 million capital grant to reimburse Amazon for the costs associated with building its office space.

Amazon said it also plans to take advantage of incentives through New York City’s Industrial and Commercial Abatement Program and New York City’s Relocation and Employment Assistance Program (REAP). Unlike the incentive offered by state officials, these city programs are available to any businesses that meet their specific requirements. Tax breaks through REAP, for instance, could add up to $900 million.

For the Arlington County location, Virginia’s commonwealth government has offered $750 million in grants, split across two phases. The first $550 million will be paid out starting in 2024 through 2030 based on Amazon hiring the promised 25,000 new jobs. An additional $220 million will be given to Amazon if it adds another 12,850 new jobs. Arlington County also chipped in $23 million in the form of a grant to cover taxes associated with hotel stays.

State and local lawmakers in both New York and Virginia have also offered to invest money in infrastructure and other improvements.

How Amazon’s HQ2 incentives stack up

While $3.4 billion is nothing to sniff at, Amazon had reportedly received better offers. Maryland was offering $8.5 billion in tax and infrastructure incentives to Amazon as part of the bid for Montgomery County, while New Jersey was offered $7 billion in incentives as part of its Newark proposal.

“These regions were not chosen by Amazon for tax breaks,” said Heather Redman, managing partner at venture capital firm Flying Fish Partners and the former chair of the Seattle Metropolitan Chamber of Commerce. “These regions were chosen because this is where the talent currently lives or wants to live.”

Still, Amazon’s HQ2 incentives are set to rank as one of the largest in the country’s history, Walczak said. Here’s how it compares to other recent large incentives packages corporations have received for building large manufacturing facilities or corporate headquarters:

1. Boeing

BA, -2.11%

 (Washington, 2013): $8.7 billion

2. Alcoa

AA, +2.94%

 (New York, 2007): $5.6 billion

3. Foxconn (Wisconsin, 2017): $4.8 billion

4. Boeing (Washington, 2003): $3.2 billion

5. Amazon (New York for HQ2, 2018): $2.6 billion

6. General Motors

GM, +0.67%

 (Michigan, 2009): $2.3 billion

7. Ford Motor

F, +0.53%

 (Michigan, 2010): $2.3 billion

8. Sempra Energy

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 (Louisiana, 2013): $2.2 billion

9. Nike

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 (Oregon, 2012) $2 billion

Indeed, mega-deals, or incentives packages that cost more than $75 million, have become increasingly common in recent years. Between 1976 and June 2018, there have been nearly 400 deals of this size, according to Good Jobs First.

While some of these packages were offered to large corporations to spur them to relocate a corporate office or factory, in other cases lawmakers have struck these deals in order to persuade the companies to stay where they already were.

As for the discrepancy in size between Virginia and New York’s offers — despite the fact that both locations are expected to receive the same number of jobs — a number of factors are at play. New York has historically been inclined to provide tax breaks and other deals to lure corporations. With 33 so-called mega-deals, it has more on the books than any other state except Michigan, which has 35.

“New York does have a history of giving out more in the aggregate and per-person,” said Dave Friedfel, director of state studies at the Citizens Budget Commission, a nonpartisan, nonprofit civic organization that lobbies for changes to the government finances in New York.

Moreover, factors such as the higher cost of living and higher taxes in New York relative to other places (including Virginia) also contribute, Walczak said.

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Big question for Amazon's 2 chosen cities: Will it pay off?

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WASHINGTON — The awarding of Amazon’s second headquarters to two affluent localities has fanned intense speculation around a key question: For the winning cities, will the economic payoff prove to be worth the cost?

Amazon’s decision will bring to Arlington, Virginia, and the Long Island City section of New York a combined 50,000 jobs and $5 billion in investment over the next two decades. But the influx is sure to swell already-high home prices and apartment rents and could overwhelm public transportation systems. And the two areas combined are providing over $2 billion in subsidies to one of the world’s richest companies — a bounty that many analysts say probably wasn’t necessary to sway Amazon.

The decision to bring those jobs, which Amazon says will pay an average of $150,000 a year, to the New York and Washington areas will also exacerbate U.S. regional inequalities, economists say. Such Midwestern cities as Columbus, Ohio, and Indianapolis, Indiana, which made Amazon’s short list, would have helped spread the tech industry’s high-skilled, high-paying jobs more broadly.

"It’s ambiguous for the winners, not good for the ‘losers’ and not good at all for the nation," said Mark Muro, a senior fellow at the Brookings Institution.

Still, on the surface, the deal appears to be better than most. Amazon says it’s receiving $1.525 billion in incentives and subsidies from New York state and $573 million from Virginia and Arlington County. That works out to $61,000 in incentives provided to Amazon for each job in Long Island City and roughly $23,000 for each job in Arlington.

That compares with a much larger average figure of $658,000 per job for other large deals, said Greg LeRoy, executive director of Good Jobs First, a nonpartisan watchdog group. Taiwanese manufacturer Foxconn, for example, received $4.8 billion in subsidies for a plant in Wisconsin on which it broke ground this year. That deal is expected to bring just 13,000 jobs.

Still, Amazon’s total subsidies will likely end up much higher, LeRoy said. Amazon said it will also apply for existing incentive programs that could add nearly $1 billion to the subsidies from New York.

And Amazon’s final selections suggest that all the subsidies and giveaways probably weren’t needed, other economists said. Other state and local governments offered a lot more, including at least $8.5 billion on behalf of Montgomery County, Maryland, and $7 billion for Newark, New Jersey.

"If Amazon was pursuing subsidies, it made the wrong decision," said Michael Ferren, a research fellow at George Mason University’s Mercatus Center. "Even the biggest subsidies you can imagine really don’t sway these kinds of decisions."

Rather, Amazon’s top priority was having access to a sizable pool of highly skilled employees, Ferren said, and it likely would have chosen the same two locations even without the subsidies.

"The only things they’re useful for are the companies that get them and the politicians who get the credit," he said.

Indeed, Jay Carney, an Amazon senior vice-president, acknowledged in an interview on CNN that the company had chosen two locations that offered less in subsidies than others had.

"That reflects that talent was really the driving factor for us," Carney said.

Some experts in regional economics suggested that the payoff for the selected cities would go well beyond Amazon’s initial investment. Stephen Fuller, an economist at George Mason University, estimates that the new headquarters in Arlington would generate roughly $1.3 billion in spending each year after the initial construction is complete. That would support nearly 50,000 jobs in the state, Fuller said, in addition to those at Amazon.

"It’s really a no-brainer," Fuller said. "They’re going to pay an enormous amount in real estate taxes and sales taxes."

Fuller also argues that the region is large enough to absorb the influx of new workers.

"The region adds 50,000 jobs every year, and no one complains about that," Fuller said. "They’re not all coming at one time; they’re coming over 15-20 years. It isn’t as overwhelming as people think it’s going to be."

At the same time, Tim Bartik, a senior economist at the Upjohn Institute, cautioned that with unemployment so low in both cities, many of the jobs Amazon will bring will likely go to people who don’t now live in either Arlington or New York. The inflow of those workers could burden schools and transportation systems.

A coalition of non-profit groups warned that Amazon’s arrival will likely worsen housing affordability for many lower-income workers in the two cities. Roughly one-third of residents in Washington, D.C., and 40 per cent in New York pay more than 30 per cent of their income on housing, the groups, which include LeRoy’s Good Jobs First, pointed out. The typical rent in Queens, which includes Long Island City, is already $3,000 a month.

Some analysts had thought Amazon might follow a trend that other companies have set and add jobs in cities where salaries and housing were often cheaper. A few Wall Street banks, for example, have sent many of their back-office jobs to states far from New York. The auto factories that once filled the Midwest have migrated to the South, where labour unions have held less sway.

Instead, Amazon chose to expand its footprint to two places where salaries and home prices are relatively close to those of Seattle, its current sole headquarters city, said Aaron Terrazas, senior economist at the real estate firm Zillow.

"These two markets definitely can absorb this kind of employment shock — and they have some time to prepare for it," he said.

——

AP Economics Writer Josh Boak contributed to this report.

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Canada Post workers back on the picket line in St. John's

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Canada Post workers at the main sorting station on Kenmount Road in St. John's are out in the wet snow Wednesday morning to stand on the picket line.

The strike began Tuesday at about 7 p.m. and affect workers in St. John's, Clarenville and 28 satellite offices across the Avalon.

It's part of a national Canadian Union of Postal Workers rotating strike, which has so far affected many major cities in the country, including Ottawa, Montreal, Vancouver and Toronto.

Todd Murray is one of the Canada Post workers striking outside the main sorting station on Kenmount Road in St. John's Wednesday morning. (Fred Hutton/CBC)

The strikes first hit the province in early November, when hundreds of Canada Post employees across the Avalon walked out of their jobs for about a day.

The union wants Canada Post to provide greater job security through the creation of more full-time positions, arguing that temporary workers are consistently paid less, have no guaranteed hours, and have no access to health or dental benefits.

The strike in St. John's is part of a national CUPW rotating strike effort. (Fred Hutton/CBC)

The federal government named a special mediator in late October in hopes of ending the rotating walkouts. But union negotiators say there was little progress during the 2½​ weeks that a special mediator was assigned to the dispute.

With files from Fred Hutton

Read more stories from CBC Newfoundland and Labrador

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