Volkswagen AG opens Chattanooga plant

Article by Christian A., on May 26, 2011

The new $1-billion factory of Volkswagen AG in Chattanooga, Tennessee, that recently opened promises to increase sales in the United States as demand for vehicle continues to improve after having had its sales drop to a 27-year low in 2009.

In July 2008, which is several months before the crash of the U.S. economy, the company announced that it plans to build the Chattanooga plant, which will produce the Passat midsize sedan. Back then, A spokeswoman for Volkswagen AG said the company is "absolutely not" having any regrets about the timing of the new Chattanooga site. In fact, at the time, the German carmaker is also building assembly facilities in Russia and India.

Chief Executive Officer Martin Winterkorn has previously stated that he intends to increase the company's annual U.S. sales by 2018 to 1 million units, including Audi.

The company disclosed that the United Auto Workers union will possibly try to organize the employees there. Bob King, president of UAW, stated that he intends to create at least one non-union auto plant in the U.S. this year. He added that preliminary talks have started but has declined to identify the companies that may be targeted.

On another note, the Ann Arbor, Michigan-based Center for Automotive Research has revealed that vehicle manufacturers have announced at least $17 billion investments in plant expansions for Canada and the U.S. since 2010 began, including the General Motors Co.’s $2 billion investment this month.

Based on the average estimate of 18 analysts that Bloomberg surveyed, total light truck and car sales may increase to 13 million this year. Sales for light vehicle in 2010 reached 11.6 million.

Since the Chattanooga assembly site will be producing a localized product, it would allow Volkswagen to avoid exchange rate fluctuations while possibly reducing vulnerability to extended supply chain issues. Interestingly, while the Chattanooga plant will be assembling 150,000 vehicles a year when it start operations, Volkswagen is already planning to start construction of a second phase that would increase the site’s production capacity to around 592,000 vehicles a year.

The design of VW’s Chattanooga plant was penned by the SSOE, an engineering and architecture firm from Nashville engineering and architecture firm. Imported auto parts in containers for the plant will be handled by the Port of Savannah, Georgia's Garden City Terminal.

Volkswagen invested around $1 billion U.S. dollars to construct the plant, receiving about $577 million in incentives from the local, state, and federal governments. Alabama had offered incentives of $385 million. Preliminary construction of the facility started in Fall 2008, while the Ceremonial "Wall-Raising" occurred in May 2009. The first Passat sedan rolled off the assembly line on April 18, 2011.

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