Chattanooga: Passing lane in progress

Chattanooga: Passing lane in progress

May 17th, 2009 by Mike Pare in News

Staff Photo by Patrick Smith Jack McGuire details a Volkswagen car for VW's "wall raising" ceremony at Enterprise South on Wednesday. VW announced Wednesday that chief executive Dr. Martin Winterkorn will not attend today due to the company's pending merger with Porsche.

Staff Photo by Patrick Smith Jack McGuire details a...

To cross the finish line as the No. 1 carmaker in the world, Volkswagen must drive through Chattanooga.

"It's important to be a producer in the important markets of the world," Jochem Heizmann, the company's board member in charge of worldwide production, said in an interview with the Chattanooga Times Free Press.

Dr. Heizmann, an engineer, said construction of the $1 billion Chattanooga assembly plant sends "a clear message" to the entire auto industry.

"Our mission is to bring VW to the hearts and minds of the American people," he said last week while in the city for a ceremonial wall raising at the factory that's to start making cars in early 2011.

VW was No. 3 in the world in sales for the first quarter, selling 1.4 million units. Toyota Motor Corp. topped the list at 1.7 million vehicles, followed by General Motors. VW has more than 40 plants worldwide, but does not assemble cars in the United States.

Dr. Heizmann and other top VW officials touted German engineering, technology and manufacturing savvy to help it surpass Toyota and GM.

Stefan Jacoby, Volkswagen Group of America's chief executive, said it plans to offer "a very European design" and performance to capture a bigger share of the key midsize sedan market in the U.S.

"Volkswagen is an icon," he said. "VW is a strong brand."

The Chattanooga plant will make the new sedan on which VW is hinging much of its goals. Mr. Jacoby said the automaker can become a major player in the U.S. only if it competes in the major vehicle segments such as midsize cars.

That focus for broadbased selling marks a big change for VW in the United States, Mr. Jacoby said.

"It had been a niche segment. Now ... we'll compete in the major segments in the U.S.," he said.

VW executives also said the Chattanooga facility will be a state-of-the-art green factory, bringing to the city what the company has learned at other plants worldwide. VW, for example, will use a water-based paint that's easy on the environment.

Dr. Heizmann said the company is moving forward with the plant in a recession because executives know the market will pick up again.

"The United States is a great car market, and we believe there is a promising future for VW here," he said.

Dr. Heizmann said the planned addition of Porsche, under intense discussions in Germany, would create 10 brands under the new corporate umbrella.

"Volkswagen welcomes the recent decision for a new integrated company," he said.


Company officials already are thinking about a future expansion in Chattanooga and boosting production from 150,000 vehicles annually to 300,000. Officials for Audi, VW's upscale brand, also are looking at possible American production.

Late last year, the company filed documents with the city-county Air Pollution Control Bureau indicating that after production starts it could expand to include more paint and press lines. The expanded facility would have the potential to produce 595,000 vehicles a year, the documents show.

Erich Merkle, a Michigan-based auto industry analyst, said the company could build a midsize crossover or sport utility vehicle based on the same platform as the car.

He said that vehicle could be priced similarly to a Ford Edge or Honda Pilot.

"That's really what VW needs," he said.

Dr. Heizmann said there's no set expansion plan yet, but the company has options.

"We have the flexibility integrated into the plant - one is to expand it and on the other hand to produce other cars as well. We have to do it step by step," he said.

Mr. Jacoby said no one knows how long the economic recession may last, and recovery might not come until the end of this year or 2010.

"Sales could fall below 10 million vehicles for the first time in more than a decade," he said about the American market.

But, Mr. Jacoby said, VW has seen market share rise by 36 percent in the U.S. so far this year.

"This market will turn around and come back to a very healthy level," he said.

VW's CEO of American operations said the company's environmentally friendly clean diesel technology in its Jettas will help boost market share, which is relatively small in the U.S. compared to Toyota.

"We see a higher demand (for diesel). It will take time in the U.S," he said. But he predicted it could eventually hold a significant stake in the market.


A year ago, workers started cutting trees and bulldozing dirt to help Volkswagen officials better evaluate Enterprise South industrial park and decide where to site an assembly plant.

Today, construction of the new factory is well under way in Chattanooga, putting VW on the road to becoming what its officials call "an American car maker," growing its sales here and catapulting it to the world's top automaker.

"It's hard to believe all that has happened in a year," said Chattanooga Mayor Ron Littlefield.

VW has hired about 100 people in Chattanooga so far and is actively recruiting about 70 more, according to the car company.

Most of those white-collar positions are in purchasing and human resources, but toward the end of this year the company will begin to fill some assembly line work posts.

VW plans to hire 2,000 people in connection with the plant after it starts making cars in early 2011.

Frank Fischer, chief executive of VW's Chattanooga operations, said company management on both the American and European sides came together recently for the first time in six to eight months for a strategy workshop.

The idea was to "take time to reflect on what we have done so far and straighten the direction," he said.