Volkswagen to award SUV to Chattanooga, report says

Volkswagen to award SUV to Chattanooga, report says

June 20th, 2014 by Mike Pare in Business Around the Region

The Volkswagen assembly plant in Chattanooga builds vehicles.

Photo by Tim Barber/Times Free Press.

Volkswagen's Chattanooga factory is clearly ahead in the competition with VW's Mexican operations to build a new sport utility vehicle, a German newspaper reported Thursday.

While an official decision by the automaker hasn't been made, the new production is to be awarded shortly to the Tennessee plant, said DTS News Agency crediting the daily Frankfurter Allgemeine Zeitung.

Tennessee is offering tax breaks, staff training, and infrastructure upgrades worth about $300 million, the report said, citing company sources.

Ron Harr, the Chattanooga Area Chamber of Commerce's chief executive, said the business group wants to help VW to be successful with a new model at the plant and he hopes the report is accurate.

"We've been working with the city, county and state for a couple of years, and it would be exciting for that to come true," he said.

Assembly of a new midsize SUV is expected to mean hundreds of new jobs and hundreds of millions of dollars in investment into the factory that started producing the Passat sedan in 2011 and now employs about 2,700 workers.

Alec Gutierrez, senior analyst for Kelley Blue Book, said VW is looking at what vehicle segments are growing in the U.S. as it moves closer to assembling the seven-seat SUV.

"It's of the utmost importance if they want to turn around their fortunes in the U.S.," he said about the vehicle.

VW's sales in the U.S. have stalled as more buyers turn to SUVs and pickup trucks. While VW offers a pair of SUVs, none are seven-seaters and they're considered aging models. The automaker doesn't sell a pickup in America.

The new crossover, based on the CrossBlue concept unveiled in Detroit in 2013, is part of $7 billion the German company plans to invest in North America in the next five years, said Martin Winterkorn, VW's chief executive, earlier this year at the Detroit auto show.

He said the company would like for the SUV to be in dealer showrooms in 2016.

The reported $300 million in tax breaks are in line with a figure leaked earlier this year from an offer sheet by Tennessee economic developers to VW.

Those financial incentives were linked with 1,350 new jobs in Chattanooga -- the hiring of 960 production employees and 240 contractor workers along with 150 "headquarter" or management-type positions relocated to Tennessee, the offer sheet said.

It cited a $100 million infrastructure grant, a $35 million local infrastructure grant, $12.2 million FastTrack training grant, $7.7 million for VW Training Academy operating expenses, and a $500,000 grant for a 12-inch water line by Eastside Utility District.

In addition, the leaked offer sheet provided $22.5 million in Tennessee Department of Transportation infrastructure assistance, along with a $1.5 million state tax credit for the "headquarter" jobs.

It also cited an unknown TVA incentive to be communicated directly to the company.

Other tax incentives included a $66.6 million super job tax credit from the state, a $27.4 million in industrial machinery sales and use tax exemption, a $20.7 million in an industrial machinery credit, and a $5.5 million standard job tax credit.

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