VW Now Has Short List of Three Potential US Production Sites

Michigan? Who knew?

By Brendan Moore

04.29.2008

Volkswagen AG has announced that their march towards a U.S. production site in double-quick time has now produced a short list of three possible states. Those states are Tennessee, Alabama, and surprisingly, Michigan.

You know VW is in a hurry if they’re willing to set up shop in a state like Michigan where they are certain to have the U.A.W (United Auto Workers) breathing down their corporate neck. VW North America just recently moved their corporate headquarters from the Detroit, Michigan area to Herndon, Virginia in an effort to get their executives closer to the bulk of their customers on the East Coast of the U.S.

If Volkswagen decides to open a plant, the company is expected to start building cars within the next two years and initially produce 100,000 to 150,000 vehicles annually with a maximum capacity of 250,000 vehicles.

VW is just getting hammered to death on the euro/dollar exchange rate and needs some US production capacity as soon as they get can get it. The company is continuing to be coy about whether or not they will actually build a U.S. plant, publicly stating that they’ll make a decision by end of summer, but most astute observers consider a U.S. plant to be a foregone conclusion. The only open question is where in the United States.

Jill Bratina, a spokesperson for VW, said the value of the euro was “certainly a consideration in the process.” She said the company was making any comment on any particular site in the states.

“We reviewed many excellent sites and the process to narrow down the locations was not an easy one. We look forward to continuing to work with the states of Alabama, Michigan and Tennessee as the evaluation moves forward,” said Stefan Jacoby, Volkswagen Group of America’s president and chief executive, in a recent AP article.
Jacoby said the automaker was evaluating cost, logistics, site readiness and operational considerations as it looks at the three states.

VW has also stated that it wants to build an engine plant in the U.S. as a companion plant to the planned production facility.

In 2007, the VW and Audi brands together sold 328,068 units in the United States, down 0.3 percent from 2006. Volkswagen AG has very ambitious plans for their vehicles in the United States and on a global basis. VW plans to triple sales in the U.S. to a million units by 2018, and plans to become the No. 1 automaker in the world, passing both GM and Toyota, by the same date. VW expects to sell 10 million vehicles annually by 2018.

Back in the U.S., the combined brands ranked ahead of Mercedes-Benz USA in 2007 but behind the BMW Group (including MINI) in U.S. sales. Mercedes and BMW have assembled vehicles in the United States for years, and that U.S. production has stood them in good stead lately as the dollar continues its freefall.


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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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7 Comments

  1. I think the whole thing with Michigan is just to push up the bidding among the other two states in terms of tax credits, etc.

  2. Possible reasons:

    1. It could be that VW hopes to capitalize on the new (low) wage agreements the UAW agreed to with GM, Ford and Chrysler.

    2. There are tens of thousands of experienced ex-Big Three workers available for the asking. Even under the new wage rules it still beats being unemployed. Hiring these people would save VW tons of money on training.

    3. VW could probably acquire a closed Big 3 plant for pennies on the dollar. (Literally, considering the strength of the Euro.) Would be lots faster than building from scratch, too.

    4. Michigan desperately needs the business, so it would likely offer plenty of incentives for VW to set up shop.

    Add it all up and it makes sense –even if the UAW stuck its increasingly dull fangs into the workforce. German unions are notoriously tough, so dealing with the UAW might come as a relief for VW execs.

  3. I can’t see VW ultimately picking Michigan, either. It just doesn’t add up somehow, not when they have they those lower-wage, non-union locations available.

  4. What happened to their old U.S. factory? My ’89 GTI was made in the USA.

  5. Your 1989 GTI made in the USA? I don’t think so.

  6. I’m probably biased because I’m from here, but come on VeeDub, why not Louisiana?

    We’ve been bending our tax laws into knots trying to beg automakers, steel mills, alternative fuel producers, chemical companies, call centers, small businesses, homeless people who USED to live here, mid-size swamp rodents and waterborne bugs to come to this state and make a happy home for themselves.

    And they STILL all end up in Alabama. Isn’t Alabama, like, getting full or something?

    Sorry, end rant.

  7. Doubtful:

    I checked the sticker in the doorjam:

    Manufactured by Volkswagen of America, Inc.
    05/88

    According to the article on Wikipedia (http://en.wikipedia.org/wiki/Volkswagen#Volkswagen_from_1974_to_1990), VW had a factory in in Pennsylvania from 1978 until July 14, 1988. So my GTI was made in the last few months of the factory’s existence.

    Doubt is good, except when you state something that you apparently haven’t bothered to verify as fact. All it took was a little research, which I confess I should have done before posting my question.

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