Preparation begins on potential VW expansion site

Preparation begins on potential VW expansion site

September 19th, 2012 by Mike Pare in Business Around the Region

Newly constructed "Hail Nets" shield new Passats at the Chattanooga Volkswagen production plant.

Photo by Dan Henry /Times Free Press.

As Volkswagen pushes production of its Chattanooga-made Passat, site work will start soon to prepare a parcel possibly to mirror the existing plant.

A city panel on Tuesday awarded a $3 million contract to Wright Brothers Construction Co. for the work next to the factory.

While VW officials say no expansion of the assembly plant on the site is imminent, City Engineer Bill Payne said the state will pay for the work to move about 1 million cubic yards of dirt from one part of the tract to another.

After the dirt has settled, another contract will be awarded in the spring to finish the site work, he told the city's Industrial Development Board. Payne said the state is finalizing what it originally promised VW.

Automotive News last week reiterated that the Chattanooga factory could be in line to produce a sport utility vehicle. Currently, the plant makes the midsize Passat sedan.

VW Group of America CEO Jonathan Browning said earlier that the automaker is "only scratching the surface" when it comes to SUV sales.

VW plans to hire 800 more workers by year's end and ramp up its workforce to 3,500 to meet demand for the Passat.

Frank Fischer, chief executive of VW's Chattanooga operations, has said the German automaker is spending $7 million to tweak the plant to bolster production to 170,000 vehicles a year, up 20,000 from the current production capacity. He said a second line could be added to the paint shop, and production ultimately could hit 250,000 vehicles a year.

Officials have said the plant could be mirrored on the adjacent parcel to double capacity, though they haven't offered a time frame.

VW contracts

Payne told the board Tuesday the city has overseen more than $229.8 million in contracts to fulfill state promises made to the automaker when it announced over four years ago it would come to Chattanooga.

In total, federal, state and local assistance for the Volkswagen plant has totaled more than $577 million, according to the University of Tennessee's Center for Business and Economic Research.

Payne said the city and project administrator EMJ Corp. managed 150 contracts since that time to ready the site and help VW build the plant and training center.

Payne said $2.2 million is left over from the state and local grant money funneled into the massive project. Those funds will be put into future VW needs consistent with the grant requirements, he said.

Steve Leach, the city's public works administrator, told the board that "after four and half years, you're probably blurry eyed from looking at stuff we presented you." Ted Mills, who heads the board, cited the city for staying within the budget.

Jason Payne, of the city's Public Works Department, said the state is permitting VW to take part of $1.5 million for workforce development to be reallocated to pay its tour guides in the plant. He said $250,000 is to be reallocated.