VW moves ahead with supplier park

VW moves ahead with supplier park

December 30th, 2009 in News

As the decade comes to a close, Chattanooga's manufacturing ended with a plus as Volkswagen picked the city as the site of its only U.S. assembly plant. (AP Photo/David Zalubowski)

Europe's largest carmaker is turning to America's biggest bank to finance an adjacent supplier park.

Volkswagen officials hope to close a $21 million loan from Bank of America this week to pay for the construction of a pair of warehouse and assembly buildings for suppliers to its new assembly plant.

The Industrial Development Board of Chattanooga approved an agreement with the German automaker to develop the buildings next year on 41 acres next to the plant taking shape in the Enterprise South industrial park.

"It's taken some time to get the financing arranged, but we're pleased to see the supplier park move ahead and look forward to the extra jobs it will bring," Chattanooga Mayor Ron Littlefield said.

The supplier park will be within the fence around the new Volkswagen plant and is expected to house more than a half dozen suppliers, officials said.

Within the new buildings, VW equipment suppliers will store and assemble car parts that are part of the new mid-sized sedan Volkswagen plans to begin producing in 2011.

Alex Leath III, a Birmingham, Ala., lawyer who represents Volkswagen, said VW wants to finance the supplier park separate from the assembly plant in order to meet European accounting standards for operating the park as a separate business.

"The supplier park will house a number of companies, although I don't know at this point the identity of those companies," Mr. Leath said.

Guenther Scherelis, general manager of communications for the Volkswagen Group of America, Inc., said VW expects to make more announcements about the supplier park in late January, once ongoing negotiations with prospective suppliers are settled.

Volkswagen will pay off the Bank of America loan over the next six years with proceeds from lease payments made by suppliers who locate within the VW-owned supplier park. The buildings and the equipment they store and produce will be integrated into Volkswagen's production operation, Mr. Leath said.

The city will lease the land beneath the buildings to VW, just as it has the other 1,250 acres on which the Volkswagen plant is being built, a move that allows the carmarker and its suppliers to be exempt from property taxes other than school taxes for the next 30 years.

The tax incentives are part of $577.4 million that the city, county and state offered VW to lure the car maker to Tennessee in 2008. The state also is building a $40 million training center near the VW plant to train workers for Volkswagen and its suppliers.

Steve Leach, Chattanooga's administrator of public works, said the city expects to issue a temporary certificate of occupancy this week for Volkswagen to move into the new training facility.

"The buildings look good, although there is a lot to do yet with the parking lots," Mr. Leach told the Industrial Development Board, which is overseeing the assistance programs for Volkswagen.

Mr. Littlefield said he expects other suppliers will locate in Chattanooga outside of the supplier park.

"I just talked with a couple of such prospects," he said.

Volkswagen is building a 1.9 million-square-foot plant that will employ more than 2,000 workers.

Within a mile of the VW complex, Gestamp Corp. also is building a $90 million plant that eventually will employ 230 workers making stamped parts and welded assemblies for the new VW sedan's undercarriage.