Reaffirming their 2018 goal of selling 800,000 vehicles annually, Volkswagen leaders announced that the new midsize SUV would be made in Chattanooga, bringing 2,000 jobs to the area and representing a $900 million investment.
Officials also announced that a national research, development and planning center will be located here, which means about 200 jobs.
The SUV will join the locally made Passat starting at the end of 2016.
Leaders made the announcement from Germany. Mayors Andy Berke and Jim Coppinger joined VW leaders, Sen. Bob Corker and Gov. Bill Haslam at the event, which aired on a live webcast this morning.
Dr. Martin Winterkorn, chairman of the board of management of Volkswagen, said:
The United States of America is and will remain one of the most important markets for Volkswagen. Over the past few years, we have achieved a lot there. We are now launching the second phase of the Volkswagen campaign in the U.S. With the midsize SUV, the expansion of the Chattanooga plant and the new development center, the focus is on the wishes of the U.S. customer. This is also a strong signal for the U.S. as an industrial and automobile production location. The Volkswagen brand is going on the attack again in America.
Investment in North American market, boost to local economy
Nearly six years ago to the day, Volkswagen leaders announced their original investment in Chattanooga. The plant opened in May 2011 and represented a $1 billion investment.
The new SUV line involves a $900 million total investment, with $600 million coming directly to Tennessee, officials said.
Officials noted that direct investments have a "multiplier effect" and ripple throughout the entire economy.
Last year, a University of Tennessee at Knoxville study showed that Volkswagen Chattanooga had created 12,400 full-time jobs, is responsible for $643.1 million in annual income and has attracted 17 supplier companies to the area, according to information from Berke's office.
Coppinger said in a prepared statement:
"Hamilton County is pleased to partner with Volkswagen as they create 2,000 new family-wage jobs, which will also generate very positive economic ripple effects for residents throughout our community. By working with Volkswagen to build on the tremendous success of their initial job creation project, we are establishing a foundation for continuing economic growth for years to come."
Berke said in a prepared statement:
"Volkswagen is one of Chattanooga’s largest and most valued employers. They have brought 12,400 living-wage jobs to our region, employed Chattanoogans and helped build our middle class. This expansion will result in a huge capital investment and thousands of new jobs. From day one, the city and county have worked hard to see today become a reality, when we can announce that Volkswagen will be adding more jobs, more investment and expanding their presence in Chattanooga."
Ron Harr, president/CEO of the Chattanooga Area Chamber of Commerce, said in a prepared statement:
"This announcement is great for Chattanooga and great for Volkswagen. Thanks to Volkswagen’s expansion, we will have a much easier time recruiting additional automotive suppliers to help them build out their supply chain while also cementing Chattanooga as ‘The Center of the Automotive South.'"
Since its opening, Volkswagen officials have said that Chattanooga’s plant is a large part of their long-term goal of capturing more of the North American market.
From 2014 to 2018, Volkswagen Group will be investing more than $7 billion in the United States and Mexico.
Since 2009, the Volkswagen brand has nearly doubled its sales, Winterkorn also said.
In 2013, the sales pace slowed down, but the new investment will help leaders meet their target.
The midsize SUV, which is based on the CrossBlue concept vehicle, was developed especially for the North American market.
"Volkswagen is expanding its commitment to the United States," Winterkorn said. "A key role will be played by Volkswagen’s SUV. This vehicle will be a true American car—big [and] attractive with lots of high tech on board."
Volkswagen America CEO Michael Horn said that the new SUV will draw in new customers to the brand and that dealers made the desire for another product very clear.
The new product will be integrated into existing plant structures, although about 538,000 square feet will be added to the existing production facility at Enterprise South.
Leaders said this is the first of many more announcements to come.
Horn said to stay tuned for information about derivative models.
"It’s really a start of a new chapter in the Volkswagen story," Horn also said. "We are growing with confidence, and we are ready to tell a lot more positive chapters."
Research and development
In addition to the new production investment, leaders also said that the company’s new independent National Research & Development and Planning Center for project coordination in the North American market will be in Chattanooga.
"It’s a new day for us in Tennessee in terms of development and innovation," Haslam said about the new facility.
The facility will mean about 200 engineering jobs for the area and signifies the company’s commitment to Tennessee, Haslam also said.
Winterkorn said the facility will help leaders meet consumer desires in the North American market.
"We are strengthening our development skills in the region and listening even closer to the voice of the American market," he said.
Corker helped broker the original Volkswagen deal, and he called the day he got the call that the company would locate here the greatest day in his public service career.
"Chattanooga has been changed forever because of your announcement," he said to Volkswagen leaders Monday morning.
Before Monday’s announcement, politicians and Volkswagen officials used the SUV as a bargaining chip, especially during the United Auto Workers union's recent failed efforts to unionize the plant.
In February, VW employees at the Chattanooga plant voted against union representation in a 712–626 vote.
Corker said that workers should vote against the UAW if they wanted to get a second vehicle.
Bernd Osterloh, who is the Volkswagen AG General and Group Works Council chairman, said that future investments in the South might be hurt if workers will not unionize, according to Reuters and Nooga.com archives.
UAW leaders still want to organize the plant and work with company leaders on a German-style works council, and Osterloh has supported that idea.
Chattanooga’s plant is one of the only VW facilities that isn’t part of Volkswagen’s works council, which is a 20-member group that has an even division of labor and management representatives.
Volkswagen officials also announced Monday that Osterloh will join the board of directors for Volkswagen Group of America.
"We are pleased that Mr. Osterloh has declared his willingness to play a concentrated role in shaping our U.S. strategy in the future," Winterkorn said. "He will represent the views of the workforce. This is in line with the codetermination culture of Volkswagen, which is one of our key success factors."
American law doesn't allow a works council here the same way it does in Germany. In the United States, a third-party organization—such as the UAW—is needed.
Last week, about 20 Volkswagen employees created a voluntary UAW chapter in Chattanooga.
UAW leaders said this is one step toward working with Volkswagen on getting a German-style works council. And they hope that if enough people join, the company will recognize the union.
Gary Casteel, secretary-treasurer of the UAW, said in a prepared statement that the UAW had a hand in Monday’s announcement.
"The UAW knew that withdrawing its objections to February's tainted election, in consensus with Volkswagen, would expedite the company's decision on the new product line," he said in a prepared statement. "The fact that the new line is being announced four days after the rollout of UAW Local 42 in Chattanooga reinforces the consensus that the UAW has reached with the company."
Last week, Volkswagen employee Mike Burton—who headed up anti-UAW efforts during the election—predicted that UAW leaders would take credit for the announcement, and he said there is no connection between the UAW and the new line.
Volkswagen leaders have said there's "no contract or other formal agreement with UAW on this matter."
But Casteel said that the comment from Volkswagen was not contradictory to what is happening.
"Upon signing up a meaningful portion of Chattanooga's workforce, we are confident the company will recognize Local 42 by dealing with its members as a member union that represents those employees," Casteel said last week.