Volkswagen to invest $600M, add 2000 jobs in Chattanooga – The Tennessean

Posted: Monday, July 14, 2014

Volkswagen is adding production of a new crossover utility vehicle in Chattanooga, a move that will bring $600 million in new investment at the plant and create more than 2,000 new jobs in Tennessee.

In a joint announcement from Volkswagen’s headquarters in Wolfsburg and the plant in Chattanooga, the world’s No. 3 automaker said it would begin producing the new three-row crossover at the end of 2016.

It will be the second vehicle to be produced at the Chattanooga plant, which began assembling the U.S. version of the Volkswagen Passat midsize sedan in 2011. Already, Volkswagen has 1,500 direct employees at the plant, with about 2,700 working there altogether, including contractors.

The new SUV will add 2,000 direct employees and thousands more associated with contractors and suppliers, said Martin Winterkorn, Volkswagen’s CEO.

Adding the SUV, to be built on the architecture of the CrossBlue concept introduced at last year’s Detroit auto show, will help Volkswagen reach its goal of selling 800,000 vehicles annually in the U.S. by 2018, he said.

“The United States of America remains an important market for Volkswagen,” Winterkorn said from Wolfsburg. “We are now taking the next step. Volkswagen is expanding its commitment to the United States. A key role here will be played by Volkswagen’s midsize SUV. It will be built by real Americans starting at the end of 2016.”

Adding the crossover and the research center to the Chattanooga facility is a “signal of a long-term commitment from Volkswagen to the region,” Winterkorn said. “I would like to thank everyone in Chattanooga and in Tennessee for your great support and trust in Volkswagen.”

Overall, the company will invest up to $900 million in launching the new SUV.

From 2014 to 2018, Volkswagen will invest more than $7 billion in the U.S. and Mexico. The company’s goal is to deliver 800,000 vehicles in the U.S. by 2018.

Winterkorn also announced that a new design center will be located in Chattanooga, bringing an additional 200 engineering jobs to the plant. The center will be focused on meeting the needs of the North American market, Winterkorn said.

Currently, the plant makes only the Passat midsize sedan, whose sales have been off this year.

The sprawling plant, built in north Chattanooga on the site of the former Volunteer Army Ammunition Plant, has a current capacity of 150,000 vehicles a year. The expansion would increase that to allow for production of the new utility vehicle, which would have seating capacity of up to seven people.

“Today is an exciting day not just for Chattanooga and Hamilton County but for all of Tennessee, and I want to thank Volkswagen for its significant long-term investment in our state,” Governor Bill Haslam said at the announcement.

Today’s announcement follows months of speculation about whether the new line would be built in Chattanooga or at one of the automaker’s plants in Mexico.

The decision also comes after a tense labor vote in February in which the UAW lost a narrow vote to represent workers at the plant. The union expressed frustration about outside influence, especially from Republican officials such as Gov. Bill Haslam and U.S. Sen. Bob Corker.

VW wants to establish a German-style works council at the plant, but cannot do so under U.S. labor law until the workers are represented by a union.

Last winter, the state of Tennessee offered up to $300 million in incentives, but that offer expired during the labor debate.

Following that vote, the state and company officials reopened discussions about incentives.

Under the final deal, Tennessee is providing a $165.8 million grant for costs associated with site development and preparation. In addition, the state will provide a $12 million grant for training new employees.

Last week, the UAW announced that it was creating a local union in Chattanooga and inviting workers to join. Union officials said they were confident that VW would recognize the union once it had more than 50 percent of workers join the group.

For its part, VW said it had no formal agreement with the union.

Reach G. Chambers Williams III at 615-259-8076 or on Twitter @gchambers3.

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