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Staff file photo by Erin O. Smith / A Volkswagen employee inspects items in the trunk of a vehicle at the Volkswagen assembly plant in Chattanooga.
some text Staff file photo by Erin O. Smith / A Volkswagen employer changes his tool while working on vehicles in the assembly line at the Volkswagen assembly plant at Enterprise South industrial park.

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BY THE NUMBERS

* 3,500 - Employees at VW plant

* $2.24 billion - VW investment in Chattanooga the past decade

* 3 - Vehicles made in Chattanooga with Passat, 7-seat Atlas SUV, 5-seat Atlas (later this year)

DETROIT — Chattanooga will take center stage at the auto show here Monday with the unveiling of the newest Volkswagen Passat sedan and the potential for electric vehicle production in the city.

VW's redesigned Passat, its biggest makeover since assembly started in Chattanooga in 2011, will show the automaker's commitment to tap the sedan market even as some companies shift from making cars in favor of more SUVs and trucks.

The departure by some carmakers opens the door for more Passat sedan sales, said Matt DeLorenzo, Kelley Blue Book's senior managing editor.

"With fewer competitors in the [sedan] market, it pencils out for Volkswagen to stay put," he said.

Even more key for VW is the massive investment the German automaker is making in electric vehicle production.

Worldwide, the company expects to invest about $50 billion in electric vehicles over the next five years, including in North America, with Chattanooga seen as "a natural fit" for production, the automaker said last year.

"That's their long-range bet," said DeLorenzo about VW's overall electric vehicle plans. North American assembly of electric vehicles is expected to help account for planned global production capacity of 1 million battery-powered vehicles by 2025, according to VW.

Tennessee Gov. Bill Haslam told the Times Free Press last month the state is "in the middle of serious conversations" with Volkswagen about the carmaker expanding production in Chattanooga.

"Volkswagen is going to build an electric vehicle. We're hoping and encouraging them to build that vehicle right here," Haslam said.

VW already employs about 3,500 people in the city, and Chattanooga Mayor Andy Berke said Volkswagen is "a big part" of the area's economy. He noted that VW is important not just because it's here, but also due to the variety of companies that are part of the automaker's supplier base.

"Gestamp is one of our biggest employers now," Berke said about the Spanish company that supplies parts to VW's Chattanooga plant and other automakers in the region with nearly 800 workers at three sites in Hamilton County. "That's a big piece that Volkswagen brings to the community."

In addition to the new Passat made in Chattanooga, VW already plans production of a five-seat sport utility vehicle later this year based off of the seven-seat Atlas SUV, which it began assembling in 2017.

DeLorenzo said as sedan sales slow, those of SUVs continue to ramp up — not only in volume and model count but automakers are looking at different ways of "slicing and dicing the segment."

New, sportier SUVs with just two rows of seats and V-6 engines are appearing, such as the five-seat Atlas and others, he said.

"That's sort of the next big thing," DeLorenzo said.

For many years, a dominant body style among vehicles was the coupe, then minivans became popular and now it's crossovers and SUVs, he said.

"Things keep evolving and changing," DeLorenzo said.

Jessica Caldwell, an analyst for the online auto researcher Edmunds, said the Atlas five-seater is "a promising vehicle" for VW.

"It's more of the sweet spot" in the marketplace, she said.

Caldwell said VW has been late to the SUV game and its vehicles don't have the same name cachet as the Ford Explorer, for example.

But, she said, the Atlas is "certainly something they have to do with the change in the market dynamics."

Passat sales have fallen while buyers turn to SUVs and trucks. Despite a 32 percent drop in sales of the Passat last year to 41,401 units, the car market in the U.S. is still massive with about 4 million sold annually, DeLorenzo said.

"The volume is still fairly significant," he said.

As VW and its suppliers grow in Chattanooga, one key for the businesses is finding more qualified workers.

Berke said the city has started an Office of Workforce Development to help all employers and connect them with high-quality workers.

"The school system plays a huge role in that, the community college, UTC," he said.

Berke said work force pressures aren't all bad because the employers need to pay more and wages rise for workers.

"That's what we've seen in our city," the mayor said. "In my mind, while having trouble finding good employees is definitely a problem, the positive side is that employers pay more. We want employers to come here and grow and have a high quality workforce. That means people can earn more."

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318. Follow him on Twitter @MikePareTFP.

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