One year later, Volkswagen plant on track

One year later, Volkswagen plant on track

July 12th, 2009 by Mike Pare in Volkswagen 2009

The paint shop under construction at the VW plant site.

Just one year after Chattanooga won the Volkswagen assembly plant, the automaker has identified suppliers for more than half of the parts needed for the new car it will build here.

VW also is "definitely planning on a supplier park" to be located adjacent to the plant, said Tom Loafman, Volkswagen Group of America's director of purchasing.

"We're on track in terms of getting the suppliers we need," he said.

This week marks one year since the German automaker picked Chattanooga over sites in Alabama and Michigan for its first American auto plant in more than 30 years.

The carmaker has withstood a global economic downturn and historic crisis in the auto industry to move ahead with the 1.9 million-square-foot factory, expected to start production in early 2011.

"It's a billion-dollar commitment," said Mark Barnes, chief operating officer of VW of America. "We're right on schedule."

All three of the main plant buildings -- the paint, assembly and body shops -- are under construction, along with a $40 million center where VW's 2,000-person work force will undergo training.

Tom Edd Wilson, the Chattanooga Area Chamber of Commerce's chief executive, said the speed of the project has been surprising.

"It has probably moved more rapidly than I anticipated it moving," he said.

VW TIMETABLE

However, if VW's site selection timetable had been six months later, Mr. Wilson wondered if the company would have taken a more critical look at its expansion in the United States in light of the economy's swoon.

"There's a lot of retrenching going on in the auto industry," he said. "Our timing was good."

Trevor Hamilton, the Chamber's vice president for economic development, said it may be awhile before another automaker builds a plant in the United States. Toyota, which Chattanooga pursued before VW but lost to Mississippi, has suspended work on its planned Tupelo plant because of the recession.

The day Toyota made its decision in 2007, Chattanooga economic developers could have taken a different direction for the Enterprise South industrial park and not pursued another automaker, Mr. Hamilton said.

"We collectively came together and said, 'We came this close to attracting a global company to Chattanooga,'" he said. "The next one happened to be VW."

FINDING PARTS

VW plans to build a new midsized sedan in Chattanooga, and Mr. Loafman said VW has found suppliers for about 65 percent of the components for the vehicle.

He said the automaker is starting with parts that take the longest lead times, such as the car's structural components, which will be produced in Chattanooga by Gestamp Corp.

Gestamp announced recently that it will build a $90 million plant at Enterprise South and employ 230 people.

Mr. Loafman said plans are to source the car's engine and drive system from existing plants in Germany and Mexico.

The tough economy is making it more difficult to find suppliers, he said, and VW is doing added upfront financial examinations of companies before it brings them on.

"It's an extra precautionary step," he said.

Concerning the supplier park, Mr. Loafman said talks are ongoing with developers.

"We're hoping to have that concluded fairly shortly," he said.

Despite the economy, local officials expect Chattanooga will see the full economic benefit of the plant and its suppliers, though it may take longer than other communities that landed automakers.

But it eventually will prove untenable for some companies to supply the VW plant from existing facilities elsewhere, said J.Ed. Marston, the Chamber's vice president for marketing.

"The community will bear the fruit of the investments" it has made in the automaker, he said.

Mr. Hamilton said as VW ramps up production beyond the announced 150,000 units it plans to build in the plant's start-up phase, suppliers will find it advantageous to land closer to the plant.

"VW intends to produce many more cars," he said.