Chattanooga, Mexico VW plants to compete for assembly if SUV gets green light

photo Volkswagen's CrossBlue SUV is designed for American motorists, according to the automaker.
photo Volkswagen's CrossBlue SUV would compete with other midsize vehicles in the segment such as the Ford Explorer, according to the carmaker.


• Six or seven seats• Slotted in size above VW Tiguan and below Touareg SUVs• Concept has diesel-electric plug-in hybrid powertrain• Fuel economy 89 mpg in electric mode, 35 mpg combined• 0 to 60 in 7 seconds• Dual-clutch transmissionSource: Volkswagen

Read about the 2013 North American International Auto Show in Detroit.

DETROIT - If Chattanooga's Volkswagen plant lands the production of a new midsize sport utility vehicle, it will likely have to battle Mexico to do so.

Mexico is hot when it comes to vehicle assembly with a variety of automakers ramping up production to take advantage of lower costs, an array of suppliers and free trade agreements.

In fact, VW last year chose Mexico for its first North American Audi production plant, and it's building an engine plant in that country. VW already has a production plant in Mexico that assembles about 600,000 vehicles a year.

Still, Chattanoogans are hopeful about the city's chances to land the SUV that would compete head to head with the Ford Explorer, Honda Pilot and Nissan Pathfinder.

"It would be a perfect product for our plant," said Frank Fischer, chief executive of VW's operations in Chattanooga, Monday at the North American International Auto Show. "I really like the design."

If VW's top decisionmakers decide the CrossBlue SUV concept is a go, the German automaker is aiming to assemble the vehicle in North America to stay away from currency fluctuations in Europe.

Fischer said the company's experience making the award-winning Passat is a big chip in Chattanooga's favor.

He said the plant produced 152,000 Passats last year, which was above the 145,000 planned. Also, exports of Passats outside America last year equaled about $400 million, the plant CEO said.

All that was done with a high level of craftsmanship, he said.

Hamilton County Mayor Jim Coppinger said the plant has shown "proven results."

"Give the credit to the workforce," he said of the plant's 3,300 employees. "That gives us a competitive edge."

Coppinger also said local and state officials are committed to wooing more suppliers to the Chattanooga region for VW.

"That's one of our purposes at the auto show," he said.

Ron Harr, CEO of the Chattanooga Area Chamber of Commerce, said that because the SUV is designed specifically for Americans, transportation is a key issue, and Chattanooga is centrally located.

He also thinks the idea of a product made in America still means a lot.

Charles Wood, the Chattanooga Area Chamber of Commerce's vice president for economic development, said the Made-in-the-USA label is critical.

"It's not just business but psychological," he said.

Chattanooga Mayor Ron Littlefield said there's also a realization that trade issues must be dealt with to make the U.S. more competitive with Mexico. Officials have said that the decision by VW last year to put the new Audi production plant in Mexico rather than the U.S. was in large part because of trade advantages.

Aaron Bragman, an auto analyst with IHS Automotive, said the midsize SUV would be a good product fit for VW.

"It's the hottest segment in the market," he said, adding that the Chattanooga plant's experience building the Passat is helpful.

Christian Klingler, VW's board member for sales, said officials were to gauge the auto show's reception to the CrossBlue. Even if VW officials sign off on the project, it could be 2015 before it hits dealerships.

Browning said Volkswagen wants a bigger share of the growing U.S. SUV market. He said the midsize SUV market is expected to grow by about 20 percent over the next several years.