VW looks down road to second model

VW looks down road to second model

March 20th, 2011 by Mike Pare in News

Dozens of new Passats made at the Chattanooga Volkswagen assembly plant are seen parked outside the plant recently. Staff photo by John Rawlston/Chattanooga Times Free Press

If Volkswagen succeeds with the rollout of its Chattanooga-made Passat, the local plant's chief said he's "100 percent sure" the factory will be entrusted with production of a second model.

The number of vehicles assembled in Chattanooga could ramp up quickly if Passat sales take off. But the comments by Frank Fischer, CEO of VW's Chattanooga operations, are the strongest indication yet that the local plant also will benefit from an additional model.

Factories that produce a single vehicle can be subject to the whims of the consumer market, and a second vehicle line would help assure the long-term viability of the plant and the estimated 2,000 to 2,500 jobs it is expected to provide.

"We now have to prove we're capable of building excellent quality and performance-driven vehicles," said Fischer.

Fischer was less specific about a timeline for a future vehicle after the Passat's launch of customer car production next month, saying a new model could be a year or more away. He also didn't mention what vehicle might be considered.

WHAT'S NEXT

• April: Volkswagen AG CEO Martin Winterkorn and board members return to Chattanooga to check progress of plant and new Passat.

• Mid-April: VW plant produces the first customer car.

• April-June: Chattanooga plant grand opening to occur in second quarter of 2011.

• July-August: Passats go on sale at dealerships in third quarter.

Source: Volkswagen

Auto analyst Aaron Bragman of IHS Automotive said there are hints that VW could assemble a sport utility vehicle to compete head to head with the Ford Explorer.

"It could be built off the larger Passat platform," he said.

VW Group of America CEO Jonathan Browning said in a telephone interview just before the Detroit auto show in January that the German automaker is "only scratching the surface" when it comes to SUV sales.

Browning said that, while VW has two "tremendous sedans" in the all-new Passat and the redesigned Jetta compact, the auto company needs to have balance in its vehicle portfolio.

The $1 billion Chattanooga plant, when fully ramped up, will have capacity to build 150,000 vehicles a year. But Browning said in Detroit that the plant ultimately could be expanded to produce 500,000 vehicles if VW decides to make the investment.

VW has said there's enough land at its Enterprise South industrial park site to mirror the existing plant and construct new space.

In an air-quality permit application filed earlier with city regulators, VW said an expansion could include more paint and press lines and expanded body and assembly shops, which would allow VW to double production from 150,000 vehicles a year to 300,000. Ultimately, the facility would have the potential to produce 595,000 vehicles a year, the documents show.

PASSAT SALES

VW sold only 12,497 of the old Passats, including wagons, in the United States in 2010, so it has plenty of room to grow sales of the all-new midsize sedan.

Competitor Toyota, for example, sold 313,212 Camrys in the year to lead the midsize auto segment and top the list of America's best-selling cars.

Concerning possible Audi assembly in the United States, Bragman said VW's luxury division needs to bolster sales to justify American production. Audi's CEO said recently that U.S. sales need to reach 150,000 annually, which it expects to do in a couple of years.

Bragman said Audi would probably would like to have its own plant, or VW could add to the Chattanooga facility.

But Fischer has said VW is focused on assembling the first customer Passat, which is slated for mid-April.

He said Volkswagen AG chief Martin Winterkorn is expected to return to the city next month along with some board members to evaluate and test vehicles.

Browning told the Chicago Economic Club earlier that the company expects VW sales in the United States this year to jump about 20 percent over 2010.

VW sales in this country rose 20 percent last year from 2009, nearly double the industry average, to 256,830 vehicles.