published Monday, January 13th, 2014

Volkswagen CEO green lights SUV; undecided on Chattanooga

  • photo
    The VW CrossBlue is shown at the 2103 North American International Auto Show
    Photo by Contributed Photo /Chattanooga Times Free Press.

KEY SPORT UTILITY VEHICLES

2013 sales in U.S.:

* Honda CR-V: 303,904

* Ford Escape: 295,280

* Chevrolet Equinox: 238,192

* Toyota RAV4: 218,249

* Jeep Grand Cherokee: 154,734

* Chevrolet Traverse: 96,467

* Nissan Pathfinder: 88,632

* Volkswagen Tiguan: 30,002

Source: Automakers

DETROIT — Volkswagen's chief executive pledged Sunday to go on a sales offensive in the U.S. that will include a new sport utility vehicle, but he stopped short of naming the automaker's Chattanooga plant as the production site.

"We haven't decided," said Martin Winterkorn after remarks to more than 300 reporters on the eve of the North American International Auto Show. "It's a question of economics."

Hundreds of new jobs and several hundred million dollars of investment are likely at stake -- a part of $7 billion that Winterkorn said VW wants to invest in North America in the next five years.

A Volkswagen of America official late last year called the Scenic City the front-runner to land the SUV. Chattanooga is said to be competing with the carmaker's facilities in Mexico.

Winterkorn also wouldn't say when a decision on the SUV assembly site will come, though one is expected soon because he wants the new vehicle based on the CrossBlue concept unveiled last year in Detroit to be ready for 2016.

While Winterkorn wouldn't reveal the assembly site, he said a decision on setting up a works council and union representation at the Tennessee factory will not be required before a location is picked.

Frank Fischer, who heads VW's Chattanooga operations, said officials are still looking at production costs related to the SUV, which is seen as key to helping the carmaker grow U.S. sales.

"Part of it is localizing suppliers to cut transportation costs," he said.

In addition, Fischer said, the company is trying to "find ways to adapt to local standards without losing the Volkswagen DNA," though he cited the "excellent quality" of the midsize Passat sedans the Chattanooga plant is putting out.

Michael Horn, the new Volkswagen of America CEO, said he is looking forward to making his first visit to the Chattanooga assembly plant, which employs about 2,700 people.

Horn, who has been at his post for about a week, called the position his "dream job."

"We start with a very good base over here," he said, noting sales have doubled since 2008 and market share is up.

Still, VW's U.S. sales last year slipped by about 7 percent, and the company is looking at gaining momentum from vehicles such as an updated Golf and new versions of the Passat and the Beetle along with higher SUV sales. A new SUV is expected to challenge such high-volume sellers as the Ford Explorer and Jeep Grand Cherokee.

Winterkorn termed 2013 "extremely challenging," though he said VW globally sold a record 9.7 million vehicles, up 4.8 percent.

The company still wants to sell 1 million VW and Audi vehicles by 2018 in the U.S., compared to about 600,000 last year.

"We're a force to be reckoned with in the U.S.," Winterkorn said during a reception at a downtown Detroit restaurant. "We'll expand its position even further."

While VW sales last year were tops among automakers in China, the world's largest car market, and No. 1 in Europe, it was far down the list in the U.S. Winterkorn called the American market "the world's toughest."

"It won't be a walk in the park," he said about expanding U.S. sales. But, the CEO said, VW is better positioned than ever before as the company stays focused on the "dreams and wishes" of American motorists.

"We have 100 percent focus on this market," he said.

VW officials have said the carmaker is just scratching the surface in terms of SUV sales in the U.S., and it's a segment that's showing healthy growth with relatively low fuel prices.

For example, VW only sold about 30,000 Tiguans and 8,200 Touaregs last year, and that was off from a year ago.

By contrast, Ford SUV sales rose 10.1 percent to 681,802 units in 2013, due largely to demand for the Escape crossover and Explorer full-sized SUV.

VW sold about 109,000 Passats in 2013 in the U.S., according to the German automaker, down from 117,000 in 2012.

However, Fischer said the number of Passats sold last year was actually up if fleet sales are excluded.

Fischer also said he is high on new Volkswagen of America chief Horn, who was named to succeed Jonathan Browning late last year.

Hamilton County Mayor Jim Coppinger said he remains hopeful the Chattanooga plant will land the SUV.

"I'm extremely optimistic," he said last week in Chattanooga.

The automaker already has spent $7 million to tweak the Chattanooga plant to boost production to 170,000 vehicles a year, an increase of 20,000.

Officials have said that a second line could be added to the paint shop, and production ultimately could hit 250,000 vehicles a year.

In addition, site work has been ongoing to prepare an adjacent parcel possibly to mirror the existing plant and double capacity some day, though VW hasn't offered a time frame.

That work is being done to finalize site prep that was originally promised to VW by the state, according to officials.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.

about Mike Pare...

Mike Pare, the deputy Business editor at the Chattanooga Times Free Press, has worked at the paper for 27 years. In addition to editing, Mike also writes Business stories and covers Volkswagen, economic development and manufacturing in Chattanooga and the surrounding area. In the past he also has covered higher education. Mike, a native of Fort Lauderdale, Fla., received a bachelor’s degree in communications from Florida Atlantic University. he worked at the Rome News-Tribune before ...

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