Volkswagen's CEO: New SUV key to VW growth in U.S.

Volkswagen's CEO: New SUV key to VW growth in U.S.

May 14th, 2014 by Mike Pare in Business Around the Region

This Volkswagen image shows the midsize SUV VW plans to build for the American market.

Photo by Contributed Photo/Times Free Press.

Martin Winterkorn is CEO of the Volkswagen group.

Photo by Associated Press/Times Free Press.

Volkswagen's chief on Tuesday pegged a speed-up in U.S. sales to a new sport utility vehicle that may be assembled in Chattanooga, calling the SUV a key part of the carmaker's foundation for growth.

VW CEO Martin Winterkorn didn't name Chattanooga, or any location, as the SUV production site. But he said the automaker must grow in the Americas if it is to reach its 2018 goals, which include selling 10 million vehicles annually worldwide within four years.

"One thing is clear: the Americas are an essential element of our Strategy 2018," he told VW shareholders during the company's annual meeting in Hanover, Germany.

The German automaker's sales through April have risen 6 per cent to more than 3.2 million vehicles globally, a record for the period. But the growth has been supported chiefly by expansion in China, as VW's efforts to push into the U.S. market have stalled. The VW brand's sales fell 10 per cent through April of this year compared with the same period a year ago.

Winterkorn told shareholders that VW has laid the foundation for growth in North and South America with the decision to make the SUV, build a new Audi factory in Mexico and revamp its model lineup in Brazil.

"We want - and must - grow there in terms of substance and profitability," he said.

VW has said Chattanooga is in the lead to assemble the SUV so buyers can see it in dealer showrooms in 2016. Chattanooga, competing with VW operations in Mexico for the vehicle, could gain around 1,000 jobs and hundreds of millions of dollars in new investment if it lands the SUV.

U.S. Sen. Bob Corker, R-Tenn., said Monday he expects a decision in the "very near future" and that it's moving "in the right direction." He said amid the United Auto Workers election at the plant in February that he'd been assured that should workers vote against the union, VW would announce that it will make the SUV in Chattanooga. The UAW lost the election by a 53 percent to 47 percent margin.

Alec Gutierrez, a senior analyst for Kelley Blue Book, said Chattanooga "appears to be the front-runner" to assemble the SUV.

"If I roll the dice, the odds are pretty good," he said.

Gutierrez said sales in the midsize SUV market in the U.S. are up 10 percent so far this year, but VW doesn't currently sell such a seven-seat vehicle in America. He said small SUV sales are up 20 percent, and VW has indicated it's looking at upgrading its aging Tiguan in that segment.

"It's of the utmost importance if they want to turn around their fortunes in the U.S.," Gutierrez said about VW revamping its SUV lineup.

VW unveiled the midsize SUV, dubbed the CrossBlue, at the January 2013 Detroit auto show. The state has offered nearly $300 million in financial incentives to land the project, which could include 240 contractor jobs and 150 "headquarters" or management slots.

The state withdrew the offer just before the UAW vote. The union later appealed for a revote to the National Labor Relations Board, but the UAW withdrew that appeal more than three weeks ago. The state said last week that it had restarted talks with VW but a meeting hadn't been held on the project yet.

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