published Sunday, July 20th, 2014

More to come for Volkswagen in Chattanooga?

  • photo
    A VW worker adjusts a headlight at the Puebla assembly plant in Mexico. Company officials see even more growth ahead for the Chattanooga plant.
    Photo by Contributed Photo /Chattanooga Times Free Press.

HITTING THE GAS ON GROWTH

Some Southern auto plants have seen big investment and job growth:

* Tennessee: Japanese carmaker Nissan's factory in Smyrna, Tenn., employs 8,000 people, a near-record for the plant that started assembly in 1983. The plant may build more than 660,000 vehicles this year.

* South Carolina: BMW's plant in Greer, S.C., which started 20 years ago, will see $1 billion invested to boost production by 50 percent in the next two years. By 2016, BMW will be able to produce up to 450,000 vehicles a year. The investment will increase its work force to 8,800.

* Kentucky: Toyota, which started making cars in Georgetown, Ky., in 1988, recently marked production of 10 million vehicles. Full-time employment is around 7,000 people and investment has topped $5.9 billion so far.

* Mississippi: Nissan's Canton, Miss., plant over the last decade has seen investment of more than $2.6 billion. With 500 recently announced jobs, the plant will grow to more than 6,000 manufacturing slots for the first time in its nearly 11-year history. A new on-site supplier park is to be completed this fall.

* Alabama: At Honda in Lincoln, Ala., the Japanese automaker in the last three years has added more than 450 jobs and spent over $508 million. The $2 billion-plus plant employs more than 4,000 people.

Volkswagen's Chattanooga plant lapped its Mexican competition to land a new sport utility vehicle, but the company's operations south of the border are what officials here dream about for the Tennessee factory.

Hamilton County officials are upbeat about the chances that the Chattanooga factory will see growth even above the SUV.

The plant will retool to hold a new way of making vehicles that will allow the assembly of more and different models, which some believe will help drive the factory toward the high production levels of VW in Mexico.

As significant as VW's investments and growth in Chattanooga have been, the numbers across the board are dwarfed by the company's Puebla, Mexico, operation. VW has invested five times as much money in Puebla, which boasts nearly 16,000 employees and last year produced half a million vehicles.

And there have been hints that Chattanooga could grow even further.

"From some of the comments that have been said publicly and that I've heard, it gives me some optimism," said Hamilton County Mayor Jim Coppinger.

Michael Horn, Volkswagen of America's chief, said it this way last week in Chattanooga: "There are more derivative models that potentially could be built here. I think there's more to come."

The city last week celebrated VW's plan to invest $600 million more in Chattanooga to build a new seven-seat SUV, creating 2,000 jobs, including 200 in a new research and development center. Chattanooga won out over Puebla, a sprawling facility the German company opened in the mid-1960s.

In that time, VW has plowed about $8 billion into Puebla, compared to about $1.6 billion in Chattanooga with the new money.

Puebla makes the Jetta, Beetle, Beetle Cabriolet and the new Golf. Chattanooga assembles the Passat at present, though plans are to start cranking out the SUV in late 2016.

In all, Puebla made about 515,000 vehicles last year, while the Enterprise South industrial park plant can produce about 170,000, according to VW. The Mexico plant also makes engines, stamps body parts and produces axles and catalytic converters.

More eye-popping is that Puebla employs 15,800 employees, compared to Chattanooga's 2,400 currently.

VW says there are also are more than 50 suppliers within 30 miles of the Mexican plant. Some 20 of its key suppliers are located in industrial parks next to the plant.

Chattanooga Mayor Andy Berke cited plans for VW to free up about 300 acres next to the Chattanooga plant for auto suppliers to service VW and potentially other auto plants in the South as well.

"It's a great opportunity to bring more jobs to Chattanooga," Berke said.

Hamilton County economic developers still believe supplier companies can create many more jobs than they now do in the area.

The addition of a second line in Chattanooga is seen as providing more of an impetus for suppliers to invest in the region and open plants. The French fender and bumper maker Plastic Omnium recently revealed plans to create 300 jobs at Enterprise South.

"There's every reason to believe that with a critical mass of cars [made at the Chattanooga plant,] there will be even more top suppliers ..." Berke said.

In addition to Puebla, VW opened a factory in nearby Silao last year to make engines, including some for the Chattanooga-made Passat. That factory is designed to produce up to 330,000 power plants annually and employs about 600.

A run-up in growth at the Chattanooga plant wouldn't be out of the ordinary for foreign automakers that have put assembly plants in the South.

For example, Nissan in Smyrna, Tenn., employs 8,000 people. BMW in Greer, S.C., is expected to be up to 8,800 workers when an expansion is finished in 2016.

However, VW's continued plant growth, as at all the factories, will depend on boosting its U.S. sales. While VW has doubled U.S. sales to about 400,000 units since 2010, the numbers slid over the past year as Americans bought the SUVs and truck lines that VW lacks here.

Jesse Toprak, chief analyst at Cars.com, said VW is "behind the times" in the market.

"Lack of product in the SUV segment is a major competitive disadvantage," he said.

Toprak also said that VW's prices often are higher than the competition and that the company needs to take another look at product styling for the U.S. market. That's something new R&D center is expected to address.

Officials say Hamilton County also needs to continue to upgrade its education system to provide trainable workers to the Chattanooga plant and its suppliers.

"The education system still needs improvement," Berke said.

Coppinger, too, talks about enhancing the area's workforce.

"There's much more technology and sophistication in advanced manufacturing," he said.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.

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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