Volkswagen selects Chattanooga for plant
CHATTANOOGA, Tenn. -- Volkswagen has chosen Chattanooga for its U.S. assembly plant, which will employ about 2,000 workers and make a new mid-sized sedan, aiming to triple sales in the United States by 2018.
Sites in Alabama and Michigan also were considered by Europe's biggest automaker, which plans to invest about $1 billion in the Tennessee plant.
Volkswagen's announcement Tuesday occurred on the same day that the euro soared to a new high against the dollar and the same day that General Motors executives in Detroit announced planned layoffs.
The German automaker's announcement also comes nearly 20 years after VW closed its last U.S. plant in East Huntingdon, Westmoreland County.
Volkswagen opened the East Huntingdon plant in 1978 at the site of a dormant plant built for Chrysler in the late 1960s. VW produced about 1 million Rabbit, Golf and Jetta models over the next 10 years. When sales plunged, VW closed the plant in 1988, resulting in 1,725 job losses.
The Westmoreland County plant was vacant for about four years until Sony Corp. bought it in 1990 and began building television sets in 1992.
Volkswagen has said the surging euro pushed along plans for a production facility in the United States. The euro's rise has made goods exported from Germany more expensive in the United States.
Production at the Chattanooga plant is expected to begin in 2011.
David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., said the strong euro dictated Volkswagen's timing to announce the Chattanooga plant. He said making a mid-priced vehicle in Europe "can't be viable."
"They had to come here," Cole said. "It's a very competitive market. If you are going to do anything with that market, you have to be here."
Stefan Jacoby, president and CEO of Volkswagen Group of America, received several standing ovations yesterday as he told Tennessee Gov. Phil Bredesen and hundreds of people at a news conference that VW has chosen Chattanooga for the plant.
Jacoby said the company's selection of Chattanooga is part of a strategy aimed at "connecting more with U.S. customers."
Volkswagen said the new sedan will be designed specifically for North American consumers. The automaker now holds a 2 percent share of the U.S. market and plans to sell 800,000 vehicles in 10 years.
Parent Volkswagen AG said it has approved up to $991.4 million to build the Tennessee plant, aiming for a capacity of 150,000 vehicles a year.
Volkswagen executives said the new plant, in addition to factories in India and Russia, is part of the company's strategy to become the world's No. 2 automaker.
The South offers ample highway and rail connections and hundreds of existing suppliers, said Volkswagen. The South's main appeal, though, is a pool of workers who have shown at other European and Asian assembly plants that they can live without the United Auto Workers union.
Kristine Moroskey, a United Auto Workers spokeswoman, declined comment yesterday about the Chattanooga plant.
