Justin Cook | The Roanoke Times

Workers lower a truck cab onto a chassis at the Volvo plant in Pulaski County. Employment at the plant is now about 1,200.

In 1999, Virginia officials gave Volvo Trucks North America in Pulaski County a chance to earn millions in state grants and tax credits if it completed a major plant expansion, hired nearly 1,300 additional workers and created a worker-training center.

Last month, the company sent a portion of the money back because of missed hiring targets.

"We have instituted a clawback with Volvo," said Christie Miller, spokeswoman for the Virginia Economic Development Partnership.

According to information from the agency, Volvo is in the process of repaying $1.29 million of $3.6 million the company received under a state grant and tax-break program. Because of its inability to fully comply with the terms of the original deal, which had a maximum potential value of $50.7 million, the deal has been canceled, officials said.

Virginia, like other states, gives money to expanding companies to encourage economic growth. Public officials often grandly publicize the gifts, as Gov. Jim Gilmore did when he announced the Volvo deal in his January 1999 State of the Commonwealth speech.

Sometimes, a portion of the money is paid before the expansion actually occurs. But state agencies including the Virginia Economic Development Partnership, the agency responsible for making the largest incentives deals, also attach "clawback" provisions under which they recover funds not earned.

Virginia partnership officials could not say Thursday how many companies are subject to clawback proceedings now. But Sandy McNinch, general counsel for the partnership, said she spends "a fair amount of time" recovering funds or granting companies more time to comply with their hiring and investment pledges. She said that shouldn't surprise anyone given the state of the economy.

In another example of a clawback, in 2005, the Spectacle Lens Group, a division of health and consumer products giant Johnson & Johnson, sent a $1.4 million check to the Roanoke Industrial Development Authority after failing to meet job-creation goals. Spectacle was given $2 million in 1999 to support growing to 600 employees by April 2005. But by June 2005, it had only 179 workers.

Volvo's multimillion-dollar deal, which it signed voluntarily in 1999, obligated the company to spend $148 million on plant upgrades and create 1,277 jobs on top of the 2,430 people it employed, Miller said.

Volvo also said it would build and operate a worker-training center for use by Volvo and other area companies. It was to be dubbed the Center for Excellence and tap New River Valley Community College for instructors.

Volvo expanded its heavy duty truck production facility, more than meeting its investment pledge. In fact, by 2003 it had spent $261 million versus the required $148 million, Miller said.

It had created 690 jobs, or 54 percent of the target, by the time it reached a 2005 deadline for meeting its hiring pledge, Miller said.

As it turned out, after missing the hiring deadline, the factory in 2006 set a production record of more than 50,000 trucks. Since then, employment has fallen in line with a dramatic sales decline.

Last year's production was about 20,000 trucks and this year's production is expected to be less. Employment, which had reached 3,000, stands at about 1,200 today.

The worker-training project, which never got off the ground, was abandoned by the company.

"Business circumstances, that is to say economic conditions combined with the market downturn, prohibit our state-mandated financial investment into the Center of Excellence project at this time or for the foreseeable future," spokesman Jim McNamara said by e-mail.

In the end, Volvo claimed only a portion of the $50.74 million earmarked for its benefit. Complete records are not available because some of the transfer amounts are protected as confidential tax figures. Other details reside in a host of state agencies separate from the economic partnership.

Partnership officials confirmed Thursday that Volvo received $3.6 million -- $3 million received in 1999 toward the physical expansion of its facility and $600,000 received toward the cost of the training center.

Earlier this year, Volvo began the repayment process when it returned the $600,000 for the training center.

Last month, it repaid another $230,000 that it had spent on its own plant expansion. It agreed to pay $230,000 again in April 2010 and April 2011, for a total return of $1.29 million, Miller said.

The repayment obligation presented "an enormous cash flow issue for them," said Del. Dave Nutter, R-Christiansburg, which is why the company is returning the money in three payments over two years.

Local government was impacted as well.

In December, the state told Pulaski County, which had received $1 million from the state toward the planned training center, to return the money by Jan. 31.

But Pulaski County, which strongly supports the training center project, is keeping the funds until an absolute repayment deadline of June 30 to maximize every chance that the center might still happen, said County Administrator Pete Huber.

Huber tied the downfall of the training center project to the downturn in Volvo's market -- North American heavy duty trucks.

The market, Huber said, "made a quick downturn. I guess it's theoretically possible for it to make a quick upturn the other way."

Del. Anne Crockett-Stark, R-Wytheville, worked in Richmond to arrange the seed money for the center and expressed regret over the outcome of the incentives deal, which was announced with fanfare and excitement that have dwindled away.

"I feel frustrated for ... not just Pulaski County. This is a plant that is the biggest employer in probably a seven-, eight-county region. I feel like it would have been a wonderful center."