VW goes on offensive with Chattanooga plant

VW goes on offensive with Chattanooga plant

May 24th, 2011 by Mike Pare in News

Romy Bhardwaj, a salesman from Huntington Beach, Calif., takes photos with his phone after finishing a tour of the Chattanooga Volkswagen assembly plant. Staff Photo by Dan Henry/Chattanooga Times Free Press

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LIVE COVERAGE

Follow live coverage of the grand opening of Chattanooga's Volkswagen plant here.

Volkswagen opens a new offensive today in the battle for car buyers with the official debut of its Chattanooga plant.

Officials and analysts said the all-new Passat assembled at the plant will hit the market at about the right time as auto sales are rising.

"There's nothing like getting on the ground floor and riding the wave," said Edmunds.com auto analyst Jeannine Fallon about U.S. sales.

With some of VW's Japanese rivals hurt by the earthquake and tsunami that struck Japan in March, the German automaker stands to grab market share in the key midsize segment with the Passat that's produced in the $1 billion Chattanooga plant.

Today, top German executives for the carmaker, along with local, state and federal officials, will mark the opening of VW's only U.S. factory.

Ray LaHood, U.S. transportation secretary, is expected to attend the unveiling of VW's first U.S. plant since it closed a facility in Pennsylvania in 1988 because of poor sales of the Rabbit.

Frank Fischer, chief executive of VW's Chattanooga operations, said both U.S. and VW car sales are heading in the right direction.

"It shows the potential," he said.

Overall, total U.S. car and truck sales hit 1.16 million in April, climbing 18 percent when compared to April 2010.

Annual sales still are below the peak of 17 million in 2005, but analysts see April gains as another sign of recovery for the auto industry and the economy. Two years ago, Americans bought just 10.4 million vehicles over the course of a year.

Volkswagen of America in April reported a 23 percent jump in U.S. sales with 28,542 units sold, its best sales month since November 2003. Year-to-date sales are up 17 percent, according to VW.

Sales of the new compact Jetta were 74 percent higher over the same month a year ago.

"We are gaining traction in the U.S. market," said Jonathan Browning, VW of America's CEO.

According to Reuters, he said Monday that VW may expand significantly its dealer network in the next three to four years.

"Safe bet"

This view shows the VW plant from the visitor's center. Staff Photo by Jake Daniels/Chattanooga Times Free Press

Aaron Bragman, an analyst for IHS Automotive, an industry forecasting company, termed the new Passat "a safe bet ... a less-expensive bet."

He noted VW has cut the base price of the car by about $7,000 and the styling of the new Passat is "the average American sedan" designed for U.S. motorists and aimed at volume sales.

Fallon said that cutting the price on the Passat puts it more in line with its competitors such as the Toyota Camry, Honda Accord and Ford Fusion.

"Moving the price point as they have is a good start," she said. "It puts VW more in the mainstream."

Also favorable to VW, Japanese carmakers are dealing with production problems because of the tsunami.

Toyota took a $1.3 billion hit from the cost of the earthquake and tsunami. Production next month is expected to be down 30 percent from normal on a global basis, the Japanese company said.

Meanwhile, Honda has warned U.S. dealers it will run short of popular models such as the Civic compact later this summer because of parts shortages caused by the earthquake and tsunami. Normal production may not return until the end of the year, Honda officials said.

Still, Fallon said Toyota is determined to recover, and VW also must deal with a resurgent Detroit Three - General Motors, Ford and Chrysler.

"Everyone is fighting for market share," she said.

VW aims to jolt sales, with the Jetta and Passat serving as the backbone of its push. Its market share in the United States edged up to 3.1 percent last year from 2.9 percent in 2009 on the sale of 256,830 vehicles.

Later this year, both the Passat and the redesigned Beetle will go on sale.

VW's sales plan, dubbed Mach 18, sets it goal in 2018 at 800,000 vehicles. That doesn't include another 200,000 sales anticipated for its sister Audi brand.

Globally, VW is striving for No. 1 in sales by 2018, up from No. 3 last year behind Toyota and General Motors.

The Chattanooga plant will have initial capacity to make 150,000 cars a year and employ between 2,000 and 2,500 workers.

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