VW tilts toward Mexico on plant

VW tilts toward Mexico on plant

July 23rd, 2010 by Mike Pare in Volkswagen

Chattanooga's chief job-growth group says it's not surprised by a report Volkswagen may be leaning toward Mexico as the site for an engine plant.

But officials said the Chattanooga area is poised for auto sector growth even if it doesn't land the engine factory.

"If the national economy cooperates with us and we have a smash launch of the (VW) new midsize sedan, our prospects are very good for additional growth related to Volkswagen," said J.Ed. Marston, the Chattanooga Area Chamber of Commerce's vice president of marketing.

He said growth could come through supplier companies creating jobs in the area or future VW expansion.

On Thursday, the German newspaper Handelsblatt said VW probably will begin building an engine plant in Mexico in September to supply its North American assembly lines starting in 2013.

Wolfgang Hatz, VW's head of engine development, said in the report that locating the plant in the U.S. is still an option, "but it looks like it's going to be northern Mexico."

Chattanooga officials have said they've pressed their case to VW that an engine plant would fit at Enterprise South industrial park adjacent to the German automaker's future assembly plant.

"You can make a strong business case for having it here," Mr. Marston said recently.

But local officials also said it's an open question whether such a factory here fits VW's North American strategy.

VW's Puebla, Mexico, site, with an annual capacity of 525,000 vehicles, is one of the world's largest plants. VW's Mexico facilities already make engines for some models.

The automaker expects its $1 billion Chattanooga plant to churn out 150,000 cars annually at full capacity starting early next year.

Mr. Marston said the Chamber's initial aim is to help make the plant successful. He said VW's ability to gain market share in the U.S. is a pre-condition to expansion in Chattanooga.

Mr. Marston said Chamber officials are "betting a successful launch of the new midsize sedan will provide many additional opportunities for Chattanooga and VW to partner in creating family-wage jobs."

Auto analyst Aaron Bragman of IHS Automotive said VW's strategy is to make North America an extremely important market.

"The Chattanooga plant is a big part of the future," he said about the factory that's slated to employ more than 2,000 workers.