published Thursday, July 8th, 2010

City lobbies VW for engine plant

Audio clip

Jeannine Fallon

Chattanooga officials are pressing their case to Volkswagen that a new engine plant would fit at Enterprise South industrial park, an official said Wednesday.

"We've openly expressed our interest and enthusiasm for that possibility with Volkswagen," said J.Ed. Marston, the Chattanooga Area Chamber of Commerce's vice president of marketing. "You can make a strong business case for having it here."

  • photo
    The engine of a Volkswagen Phaeton is on display during the shareholders' meeting in Hamburg, Germany, on Thursday, April 19, 2007.(AP Photo/Fabian Bimmer)

But it's an open question whether placing an engine factory here goes with VW's North American strategy, Mr. Marston said.

Volkswagen's top worldwide production official said Wednesday that Mexico is an option.

Jochem Heizmann, a member of VW's management board who oversees group production, reaffirmed the carmaker's interest in an engine factory in North America. He said a decision is expected soon.

"The new plant is to supply our factories in Puebla (Mexico) and Chattanooga with the latest generation of engines from 2013," Dr. Heizmann said in a statement in Mexico.

He and Mexican President Felipe Calderon opened a new section at VW's Puebla plant where assembly of the new Jetta will take place. VW plans to invest $1 billion in Mexico in the next three years.

Auto analyst Jeannine Fallon of Edmunds.com said there's certainly a savings in transportation costs in putting an engine plant near VW's Chattanooga factory.

"There'd be a lot of money saved in that process," she said.

But, Ms. Fallon said, Mexico has less expensive labor.

"That may be a serious discussion to be considered here," she said.

VW STRATEGY

Volkswagen aims to triple North American sales to 1 million vehicles by 2018.

Still, Mr. Marston said, city and Hamilton County governments and the state have been "great partners" with the Chamber in wooing companies with financial incentives.

To attract VW's assembly plant to Chattanooga, local and state governments are providing an estimated $577.4 million in tax breaks and other financial incentives.

The plant is slated to make a new midsize sedan, creating more than 2,000 VW jobs with production to start early next year. Engines for the new midsize sedan are initially to come from plants in Mexico and Germany, according to VW.

Mr. Marston said local tax breaks to companies don't cost citizens anything but rather add revenues because of increased hiring.

"If you don't get the project, there are no new tax revenues," he said.

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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