Volkswagen's timing for the startup of its Chattanooga assembly plant early next year should merge with a growing recovery in the auto market, an analyst says.
"Timewise, we're expecting a modest recovery in 2010. (Next year) should be much better," said Michelle Krebs, senior analyst for the automotive Web site Edmunds.com.
Also, the company's new Chattanooga factory likely will produce "as many cars as it can," said analyst Erich Merkle of Autoconomy.com.
"When you look at the exchange rate (between the United States and Germany), it doesn't make sense to build in Europe and ship here to the States and they've got reduce that exposure as much as possible," he said.
VW officials said the $1 billion Chattanooga assembly plant is a key pillar of its strategy in the U.S., seen as a market the automaker must grow in its drive to become No. 1 worldwide in sales.
"We're laying the groundwork to be profitable and have a durable business in the U.S.," Volkswagen Group of America chief Stefan Jacoby told a worldwide contingent of journalists at its Virginia headquarters earlier this year.
Mr. Jacoby said VW also is making progress in terms of vehicle quality. He said Consumer Reports now recommends eight Volkswagen vehicles, up from three in 2008.
NEW MODELS
VW has introduced more than a half dozen new models in the U.S. in the past couple of years and more are coming, according to the company.
Later this year, the carmaker will unveil a new compact sedan to replace its existing Jetta. Also, a redesigned New Beetle is expected by industry insiders for 2011 along with the midsize sedan the company will make in Chattanooga.
With the midsize sedan, VW is striking at the heart of the U.S. car market, Ms. Krebs said.
"It makes perfect sense to go into the biggest part of the market," she said. "It's a huge market."
Ms. Krebs said Toyota, which makes the best-selling Camry, is floundering amid a variety of recalls of its products, and VW already has a lot of expertise in making sedans.
Mr. Merkle said he expects other vehicles eventually to be produced in Chattanooga, including a sport utility vehicle. He said VW could make a midsize Audi at the plant as well.
"You want to get in a segment to get the most bang for the buck," Mr. Merkle said. "You want to go into segments that will be high growth. They're going where the market is large and it has strong potential."
VW officials have said the Chattanooga plant will have capacity to produce 150,000 vehicles and employ more than 2,000 people. They've also talked about the potential of expanding the plant's size in the future.
FUELING SALES
VW is competing in more vehicle segments than ever in the U.S., and it's bolstering its dealer network as its tries to double sales to 400,000 vehicles within a few years and then 800,000 by 2018.
The German car company plans to heavily invest in the hybrid vehicle market. It is to start selling a hybrid 2011 Touareg SUV which will achieve a combined fuel economy of about 26 miles per gallon along with power to go from zero to 62 miles per hour in 6.5 seconds, according to VW.
In Detroit earlier this year, VW introduced a gasoline-electric hybrid coupe that could make it into production.
Already, VW is producing several models holding its clean diesel engines which analysts give high marks to for fuel economy and torque.
Still, Ms. Krebs said VW will face stiff competition in meeting its goals. She said, for example, Ford is challenging VW in its home market of Europe.
Ms. Krebs also wondered if the goal of No. 1 in worldwide sales is the right one. She said if the focus is on building quality vehicles, sales will come.
"It's an ambitious goal," she said. "It's not going to come easily and it's not easy to hang on to."
There are burdens that come from being No. 1, Ms. Krebs said.
"Much more is expected of you," she said.