Mayor Berke says VW officials assure him Chattanooga SUV 'critical' to their market strategy
Calming words about Volkswagen's future in Chattanooga came Tuesday from Mayor Andy Berke, as the company's stock tumbled another 20 percent, VW's "diesel deception" widened to include 11 million vehicles worldwide, and the automaker set aside $7.3 billion to help cover costs and fines.
The widening scandal shouldn't swamp VW's plans to invest $600 million and create 2,000 new jobs to produce a new sport utility vehicle in Chattanooga, the site of VW's only U.S. assembly plant, which currently employs about 2,700 people.
"I spoke with VW leadership earlier today to express my concerns about the current situation and what impacts, if any, it might have on the Chattanooga plant," Berke said in an email Tuesday. "VW officials assured me they are taking this matter seriously and explained how critical the B SUV is to their North American market strategy."
Berke drives a city-owned diesel VW Passat on city business, and Chattanooga officials were so proud of Volkswagen's decision to open its plant here that the city spent $266,200 in state grant money in 2012 to paint "Volkswagen Chattanooga" on the factory's roof in letters 650 feet wide and 208 feet long.
A longtime area VW dealer also downplayed concerns Tuesday, even though the automaker has told its dealers not to sell cars equipped with the 2.0-liter diesel engine this year or next.
"All I know is that I have been a Volkswagen dealer going on 48 years, and we've always had ups and downs," said Al Johnson, the 81-year-old owner of Al Johnson Volkswagen Inc., in Dalton, Ga.
He's got about 10 new diesel VWs affected by the sales freeze.
"I haven't took 'em off the lot, but I can't sell them," Johnson said.
Volkswagen of America has rolled out a series of financial assistance programs to compensate its U.S. dealers amid the company's diesel emissions scandal, according to Automotive News. VW on Tuesday conceded that the problem with its diesel emission controls could affect 11 million vehicles around the world.
"There is no way to put an optimistic spin on this - this is really serious," Max Warburton, an analyst with Bernstein Research, told The Wall Street Journal. "The best cause for VW is probably still a multi-billion fine."
Christian Stadler, professor of strategic management at the Warwick Business School said companies rarely pay maximum fines under U.S. regulations.
"I don't think this is a life-threatening event, but it's clear it's going to be very expensive," he said.
Jeremy Holsomback, general manager of Village Volkswagen of Chattanooga located only a couple of miles from VW's Chattanooga factory, said he has turned down a deluge of media requests for comment.
"At this point, I'm not going to do any interviews," Holsomback said.
VW is expected to come up with a plan to recall the 482,000 diesel cars that already have been sold, but experts say a fix to the computer software might increase fuel consumption or reduce performance.
"They probably won't want to bring them in [for a recall], because they like them so much," Johnson said of drivers who own the VW diesel.
The Chattanooga Area Chamber of Commerce said in a statement that it hasn't communicated with VW, but it had an upbeat tone. The Chamber is targeting VW suppliers to draw more business and jobs to Chattanooga.
"At the Chamber, we remain focused on regional economic growth through the support of all local businesses. We have seen 5,600 jobs added to the region over the past year and are working hard to continue that trend," the statement said.
Contact staff writer Tim Omarzu at email@example.com or www.facebook.com/MeetsForBusiness or twitter.com/meetfor business or 423-757-6651.