Volkswagen Selects Chattanooga for US Assembly Plant
By Kevin Miller
While GM was busy yesterday announcing restructuring plans to raise cash, including headcount reductions and hastening the closure of some assembly plants, Volkswagen was doing just the opposite, announcing a nearly $1 billion USD expenditure to build a vehicle production factory in Chattanooga, Tennessee. The plant is expected to employ 2000 workers, with additional jobs likely at local suppliers.
Plans for the construction of this plant, which will include body production, paint shop, and assembly operations, were announced with a stated vehicle production capacity of 150,000 units per year. The factory will use a modular production process to allow for flexibility among the vehicles produced there. Powertrains for the vehicles built in Chattanooga will come from Volkswagen’s factory in Puebla, Mexico, where the New Beetle and Jetta Sedan are produced.
Among the first vehicles expected to be produced at the Chattanooga plant is a bespoke midsized sedan tailored to the US market. Automotive News reported that the new sedan will come to market for the 2011 model year and will be similar in size to today’s Passat. The new sedan which is intended to take on the Camry, Accord, and Malibu will be positioned below the Passat in Volkswagen’s model lineup.
Last year, Volkswagen outlined a new strategic direction in the U.S. based on five pillars: product, brand positioning, dealer network, organization and local production. As it moved forward to assess the potential for local production, the company considered several locations for the factory, and earlier this year had narrowed its search to Alabama, Michigan and Tennessee.
“This is a significant step forward in achieving our goals in the U.S. market and a clear sign of the Volkswagen Group’s commitment to the North American consumer. Today’s decision is a fundamental part of our new strategic direction in the U.S. and our five-pillar strategy,” said Stefan Jacoby, President and CEO of Volkswagen Group of America.
“The U.S. market is an important part of our volume strategy and we are now very resolutely accessing that market,” said Prof. Martin Winterkorn, CEO of Volkswagen AG. “This plant represents a milestone in Volkswagen’s growth strategy. We will be selling 800,000 Volkswagens in the U.S. by 2018, and this new site will play a key role.” Winterkorn went on to say that the factory “…is a prerequisite for the economic success of the company in the dollar region.”
Professor Winterkorn’s last comment refers to the fact that Volkswagen is losing money selling some of its made-in-Europe vehicles in North America. There have been rumors that Volkswagen will stop importing German-built Rabbit vehicles because of high per-vehicle losses caused in part by the weak US Dollar. Bringing this plant online will help Volkswagen produce vehicles in the US at a lower price, thereby raising per-vehicle profit. While Winterkorn’s goal of selling 800,000 vehicles per year ten years from now is perhaps overly optimistic, the company’s sales should increase if their vehicles can profitably sell for less money by being produced in Tennessee.
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