published Tuesday, July 15th, 2014

VW to build new SUV in Chattanooga, add 2,000 jobs; impact to be felt for years to come

  • photo
    From left, U.S. Sen. Bob Corker, Tennessee Gov. Bill Haslam, Volkswagen CEO Martin Winterkorn, Chattanooga Mayor Andy Berke, Hamilton County Mayor Jim Coppinger and President and CEO of Volkswagen Group of America Michael Horn attend the presentation of the new Volkswagen midsize SUV.
    Photo by Contributed Photo /Chattanooga Times Free Press.

BY THE NUMBERS

• 2,000: Number of new direct jobs to be added by VW

• 3,600: Additional jobs to be created at other businesses from the VW investment

• $900 million: Total investment by VW in new SUV vehicle for North American market

• $600 million: VW investment at Chattanooga plant and R&D facility

• $100 million: Additional annual payroll from expansion

• $1.4 million: Additional school taxes to be paid by VW

Source: Chattanooga Area Chamber of Commerce

Poll
Will VW's new SUV be successful?
  • photo
    VW CrossBlue interior is shown at the 2103 North American International Auto Show.
    Photo by Contributed Photo /Chattanooga Times Free Press.

Six years to the day that Volkswagen first motored into Chattanooga, the automaker today will start a second U.S. offensive as it powers up to make a new vehicle, creating 2,000 more jobs and investing an added $600 million at its plant here.

"It will be a true American car," Martin Winterkorn, VW's chief executive, said on Monday about the seven-seat sport utility vehicle it will assemble in Chattanooga. "It will be big, attractive and have lots of high-tech [equipment] on board."

In addition to 1,800 more assembly workers, an additional 200 engineering-type jobs will come to a new North American research, development and planning center VW will locate here.

"We'll be strengthening our development skills and expertise in the region," Winterkorn said at a news conference at VW's Wolfsburg, Germany, headquarters. "We're listening to American drivers."

VW's announcement capped months of speculation about where the company's SUV would be produced and delivers to Chattanooga its fourth-largest business investment in the region in the past five years. The SUV is a prize whose direct and indirect economic impact is expected to measure in the hundreds of millions of dollars annually once production begins.

On top of the estimated $100 million a year the SUV will add to VW's payroll, the project is expected to lead to 3,600 new jobs among area businesses, according to the Chattanooga Area Chamber of Commerce. Those new jobs will have a $218 million-a-year impact, the Chamber said.

Ron Harr, the Chamber's CEO, said more suppliers will want to be closer to the plant as it produces two vehicles instead of one.

"[The SUV] may even be bigger in terms of ultimate impact on the community" than the original VW announcement, Harr said.

And the economic opportunity may not stop there.

The Chamber said VW won't use some 1,000 acres the company has under option for the SUV expansion, leaving that tract available to mirror the existing plant if the automaker decides to expand again.

Target: 2016

VW is targeting the SUV's production to start in late 2016 to help revive flagging sales, which are down about 13 percent this year compared to 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 is to start prep work for the new addition as soon as possible at the plant, which now employs 2,400.

"There's no time to let moss grow under their feet," said Berke, who today will mark the project with VW and other officials at the Hunter Museum. That's where the company unveiled its return to making cars in America on July 15, 2008, with plans for the $1 billion Chattanooga plant.

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 VW, the company will add about 538,000 square feet to the existing 2 million-square-foot plant to make the new SUV.

Tennessee Gov. Bill Haslam said VW is "doubling down on its bet in Chattanooga" and shows "a lasting commitment to the region."

Chattanooga workers were upbeat about the expansion at the plant that now just makes the Passat midsize sedan.

"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 VW 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," he said. "Now, there will be 2,000 more getting the call and making a change in their lives."

ABOUT THE SUV

• Seven seats

• Slotted in size above the VW Tiguan and below the VW Touareg SUVs

• Concept unveiled in Detroit in 2013 had diesel-electric plug-in powertrain. Production version to have more conventional power plants.

• Concept went 0 to 60 in 7 seconds

• Dual-clutch transmission

• CrossBlue name not expected to stick with production vehicle

Source: Volkswagen, city

U.S. Sen. Bob Corker, R-Tenn., compared the buzz of the expansion to Germany's elation at winning soccer's World Cup on Sunday. But, he added, the SUV announcement will impact the lives of people in the Chattanooga area for years to come.

"This is a really big day," the former Chattanooga mayor said.

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," he added.

The Chamber said the company also will pay new local school taxes to the tune of about $1.4 million annually.

VW also named Bernd Osterloh, chairman of the company's Group Works Council globally, to the Volkswagen Group of America board of directors.

Gary Casteel, the United Auto Workers secretary-treasurer, said the expansion is "a major vote of confidence in the Volkswagen work force" and the state. Last week, the UAW set up a non-dues-paying local in Chattanooga with hopes of eventually organizing the plant after a failed attempt earlier this year.

"Stay tuned"

The new assembly line will feature VW's innovative, money-saving modular transverse toolkit. The process enables VW 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 VW officials have talked about needing.

"Stay tuned to the derivative models we have planned," said Michael Horn, Volkswagen of America's CEO. "There's more happening in the future."

Christian Koch, who became the head of VW's Chattanooga operations in May, said more announcements are coming related to hiring and construction at the plant.

"We'll be training [employees] with the same high standards" that the company has with the Passat, Koch said.

Karl Brauer, senior analyst for Kelley Blue Book's KBB.com, said the midsize SUV segment is among the hottest in the market right now.

"Volkswagen desperately needs a fresh entry here," he said, noting that financial and political uncertainty surrounding the Chattanooga plant delayed the company's decision.

In February, the UAW sought to organize the plant, but lost by a 712 to 626 margin. 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, and that restarted incentives talks between the state and VW.

Michelle Krebs, senior analyst for AutoTrader.com, said that although VW's sales are falling rather than growing, the company has reiterated a lofty goal of achieving sales of 800,000 vehicles in the U.S. by 2018, which would basically double 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.

Winterkorn said that while VW's sales pace has slowed, the SUV and Passat lay a foundation for more in the future. The plant now has the capacity to produce about 170,000 vehicles a year. The company hasn't announced a potential annual sales mark for the SUV.

The VW CEO said the company is investing $7 billion in North America for new products and technology.

House Majority Leader Gerald McCormick, a Chattanooga Republican in whose district the VW plant sits, cited the state's commitment to recruiting new business.

"It is also a compliment to the highly skilled work force that we have in this region," he said about VW's investment.

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

Corker Delivers Remarks on Volkswagen's Announcement
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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