Chattanooga VW plant may assemble two SUVs

Chattanooga VW plant may assemble two SUVs

June 17th, 2014 by Mike Pare in Business Around the Region

Michael Horn, incoming President and CEO of Volkswagen of America, speaks at the North American International Auto Show in Detroit, Mich.

Photo by Associated Press/Times Free Press.

While Volkswagen and Tennessee officials try to finalize incentives for a new midsize sport utility vehicle for the automaker's Chattanooga plant, the factory could assemble a smaller SUV as well.

Michael Horn, Volkswagen Group of America's chief executive, hinted to NBC News that details about production of the midsize SUV should be announced shortly, and it's expected to be handled by the Chattanooga plant.

The plant would undergo a significant expansion to handle a midsize SUV and possibly other future models, such as a second sport utility vehicle based on a stretched version of the current compact Tiguan, the report said.

Jessica Caldwell, an analyst for Kelley Blue Book, told the Times Free Press that the new midsize, seven-seat SUV would be "a step up" for the automaker over its current offerings.

In addition, smaller SUVs are hot sellers, Caldwell said, and buyers often shop between midsize cars and those two SUV segments.

"There's a lot of cross shopping," she said.

Caldwell cited such small SUVs as Ford's Escape and Toyota's RAV4 and noted that the VW Tiguan isn't as competitive.

"It's not really ... in line with American customer tastes," she said.

Tennessee Gov. Bill Haslam said earlier this month he's "very hopeful" about VW bringing production of the midsize SUV to Chattanooga. He said talks between the automaker and the state are "very engaged" and "very substantive."

"We're still having a lot of discussions about what they might do here," Haslam said.

Chattanooga and Mexico are finalists for the midsize SUV, though VW officials have termed the Tennessee plant as the frontrunner for the project.

The NBC report also said VW appears to be scaling back plans to reach its goal of selling 800,000 vehicles a year in the U.S. by 2018.

"For now, we have to have realistic targets," Horn said during an interview in San Francisco. He stressed that "the vision is right ... long-term. But timing is the huge challenge."

Horn said he's not ready to issue a formal statement revising the 2018 plan. But with the target date fast approaching and VW only halfway to its sales goal, there seems little doubt the maker will have to issue a public revision, he confirmed.

VW sales are expected to reach only about half the 800,000 mark this year. Horn cited gaps in VW's lineup, including SUVs.

Caldwell, too, said that one factor hurting VW's U.S. sales is that lack of offerings in the SUV and pickup truck markets.

"It's not their strong suit," she said. "Even though they offer a few SUVs, it's never really taken off. That has to improve for VW to make it in the U.S. and to be a player."

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