Nearly six years to the day that Volkswagen first motored into Chattanooga, Tenn., the automaker Monday said it is gearing up to make a new vehicle, create 2,000 jobs and invest $600 million at its existing plant.
"It will be a true American car," Martin Winterkorn, Volkswagen's chief executive, said Monday about the seven-seat sport utility vehicle the company will assemble in Chattanooga. "It will be big, attractive and have lots of high-tech on board."
In addition to adding 1,800 assembly workers to the 2,400 workers at its existing plant, Volkswagen said it will add another 200 engineering jobs by creating a new National Research & Development and Planning Center in the city.
"We'll be strengthening our development skills and expertise in the region," Winterkorn said at a news conference at Volkswagen's headquarters in Wolfsburg, Germany. "We're listening to American drivers."
Volkswagen is targeting the SUV's production to begin in late 2016 to help revive its flagging sales, which have fallen about 13 percent so far this year compared with 2013.
Chattanooga Mayor Andy Berke, who was in Germany with a contingent of Hamilton County, state and federal officials for the expansion announcement, said the automaker will start work as soon as possible at the plant that now manufactures the Passat midsize car. The company's July 15, 2008, announcement of that $1 billion plant marked its return to making cars in America.
"There's no time to let moss grow under their feet," said Berke.
Berke said the SUV, dubbed the CrossBlue when it was unveiled at the Detroit auto show in January 2013, will have a different name when it hits dealer showrooms, though he didn't know what it will be called.
According to Volkswagen, the company will add about 538,000 square feet to its existing 2 million-square-foot plant to make the new SUV.
The new assembly line will feature Volkswagen's money-saving modular transverse toolkit. The process enables Volkswagen to design models ranging from a three-door hatchback to an SUV virtually sharing the same front axle, pedal box and engine positioning, despite varying wheelbase and external dimensions.
That's seen as potentially helping Chattanooga to attract other models, such as a smaller SUV that Volkswagen officials have talked about needing.
"Stay tuned to the derivative models we have planned," said Michael Horn, CEO of Volkswagen of America Inc. "There's more happening in the future."
Winterkorn said that while Volkswagen's pace of sales has slowed, the SUV and Passat will lay a foundation for the future. The plant currently has capacity to produce about 170,000 vehicles a year. The company hasn't announced a potential annual sales mark for the SUV.
The Volkswagen CEO said the company is investing $7 billion in North America for new products and technology.
David Smith, spokesman for Republican Gov. Bill Haslam, told the Associated Press that there's no need for a special legislative session to approve state incentives for the project, which will include a $165.8 million grant to help with site development, infrastructure, production equipment acquisition and installation, and building construction. It also is offering a $12 million grant for training new employees, he said.
The Chattanooga Area Chamber of Commerce projected that the SUV project will bolster Volkswagen's payroll by about $100 million a year and that it will pay new local school taxes to the tune of about $1.4 million annually.
The SUV project is expected to multiply its economic impact by creating 3,600 new jobs among area businesses, according to the Chamber of Commerce. It said those new jobs will have a potential impact of $218 million a year.
Chattanooga workers were upbeat about news of the expansion.
"They're not just setting up tents, they're building buildings," said Sean Moss. "If we continue on the same path with the new SUV [as the Passat] in terms of quality of production, it's going to continue to get bigger."
Mike Burton, another Volkswagen employee, said he's excited for the new people who will be hired.
"Just a couple of years ago, I was thrilled to get the call," Burton said. "Now, there will be 2,000 more getting the call and making a change in their lives."
Hamilton County Mayor Jim Coppinger said the SUV means the possibility of attracting more suppliers and other jobs.
"We are creating tremendous opportunity for the future with the announcement of the new Volkswagen research and development center," Coppinger said.
Gary Casteel, the United Auto Workers secretary-treasurer, said the expansion is "a major vote of confidence in the Volkswagen workforce" and the state. Last week, the UAW set up a non-dues-paying local chapter in Chattanooga with hopes of eventually organizing the plant after a failed attempt to do so earlier this year.
In February, the UAW sought to organize the plant, but lost in a 712 to 626 vote. It later filed an appeal to the National Labor Relations Board, arguing that Republican politicians against the UAW effort interfered with the election. The UAW withdrew its appeal in April, which restarted incentives talks between the state and Volkswagen.
Michelle Krebs, senior analyst for AutoTrader.com, said that although Volkswagen's sales are falling, it has reiterated a lofty goal of achieving sales of 800,000 vehicles in the U.S. by 2018, which basically doubles its sales from today.
"To even get close to its goal, VW needs to beef up its product portfolio. This investment likely will address one of the glaring holes," she said.
Business on 07/15/2014