published Monday, May 12th, 2014

Chattanooga, Tennessee awaiting Volkswagen plant expansion

The Volkswagen assembly plant in Chattanooga is a candidate to build a new SUV.
The Volkswagen assembly plant in Chattanooga is a candidate to build a new SUV.
Photo by Tim Barber.

If Volkswagen green-lights production of a new sport utility vehicle in Chattanooga, it will be viewed as one of Tennessee's biggest economic development wins of the year.

"It certainly would be really large," said Dr. Bill Fox, who heads the University of Tennessee's Center for Business and Economic Research. If the estimates are right, the new production line will bring hundreds of millions of dollars in investment and around 1,000 new jobs.

VW's supervisory board meets in Germany today. It's the first meeting since the United Auto Workers dropped its appeal of the Chattanooga plant's union election about three weeks ago. Tennessee state officials and VW have talked, but it may be too early for the company to announce whether it will make the new SUV in Chattanooga or Mexico.

VW has said Chattanooga is the front-runner for the seven-seat SUV, which would be based on the CrossBlue prototype unveiled at the January 2013 Detroit auto show. The company has said it wants to have the vehicle in dealer showrooms in 2016. The plant now produces just the Passat midsize sedan.

Fox said auto plant projects are much sought after because of the sizable economic spin-offs they bring.

"It's not just the things happening at the plant, it's ... all the intermediate purchasing," he said, citing supplier spending.

Jack Nerad, executive marketing analyst for Kelley Blue Book, said landing the SUV line would have a ripple effect across the supplier network, other companies that support the plant and even small businesses such as restaurants.

"It would be one of the largest, if not the largest, [auto plant project] in the last two or three years" in the U.S., he said.

Nerad also said that landing the vehicle would validate VW's workforce in Chattanooga.

"It would be a real feather in the cap of the workers who are proving their mettle," he said.

Sean Moss, a VW plant worker, said he's confident Chattanooga will be chosen.

"Every indication is that we'll get it," he said.

Patty Rasmussen, a senior writer at industry magazine Site Selection, said the state's business climate is helping make it attractive to VW.

"Tennessee has got as good a shot as any of the states in the Southeast that are growing that sector," she said. "Certainly, Tennessee is positioning themselves well to compete."

The state offered nearly $300 million in financial incentives to VW late last year. That offer sheet, which became public to the media this spring, was based on 960 production jobs and 240 contractor slots. Also included were 150 "headquarter" positions.

In 2008, VW received about $577 million in state, federal and local tax breaks for bringing a new assembly plant and 2,000 jobs to America. The plant now employs about 2,700 people.

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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