Could Volkswagen be in Chattanooga's Future?

[flith]

An article from Automotive News posted on VW Vortex states that the engines will come from Mexico because the Puebla factory makes only 340,000 engines, well below its annual capacity of 500,000. However, that plant only makes gasoline engines and Jacoby said that Chattanooga plant will have gasoline, TDI (diesel) and hybrid powertrains. So that means they will have to get the diesel and transmissions from somewhere else. Currently both are imported from Germany and that brings them back to the weak Dollar vs. the strong Euro. Thomas Karig, vice president of corporate relations and strategy for Volkswagen de Mexico states that they may source Mexico for a new plant to build engines and transmissions for both N. America plants. CEO Martin Winterkorn, has also stated that they are waiting on Audi to make a decision on N. American production; joint production in Chattanooga is a possibility. A decision should be made in Spring '09.

Articles on the Chattanoogan and Times Free Press have stated that VW has asked about additional land at Enterprise South, maybe it is related to future transmission or Audi production.

I believe the 6 speed manual our Eos is from Japan.

[eflash]

This is interesting and in no way diminishes the great win for Chattanooga but a few odd things about this.

1.Gov. Bob Riley says the price for Alabama to land the Volkswagen assembly plant proved too steep.

The governor says the competition with Tennessee reached the point where Alabama didn't want to keep raising the offer.

Alabama offered a package that included $205 million in cash, plus another $181 million in tax breaks, job training and other considerations.

Riley said it was the most the state ever offered for an auto plant. (Something made Alabama uncomfortable about the deal. I think they realized they had no chance of winning

and they were being used. Some of that is expected but it became too obvious.)

2. VW perferrred the second site in HSV over the TVA megasite on I-65 which had already had environmental, some prep work and other requirements

to qualify as an auto plant ready site.This surprised Alabama officials and they really had to scramble. VW picked a site that had not had any of this work done, which put AL at a disadvantage. Why would they do this?

Since TVA would be involved with both,they wanted TVA to promote the Enterprise site which they did.TVA couldn't promote both equally.

3. How long in advance did TN know they won? From reports it could have been at least a month. So did VW manipulate the two states against each other? Yes

4. And of course all the misinformation reported here but especially out of Europe. How is that possible unless it was intentional. To get more out of TN. Just let it

"slip" which site appears to win and watch the bids go up.

5. A wishful thinking approach.. VW was scouting two sites all along, they picked Enterprise for themselves and recommended Huntsville for Audi which would sort of explain the

"wrong" media reports. Especially if the two sites were so difficult to pick a winner as they stated. Why would Audi need to look anywhere else, plus now they know basically what kind of deal they will get.

Good analysis, although I agree #5 is a bit wishful. I talked to a business development type a couple weeks before the announcement and he mentioned he attended a class focusing on strategies for maximizing governmental incentives. No surprise, the major strategy is to make sure you have two enthusiastic bidders right to the end. Your point on the possible VW logic in selecting Greenbrier vs. I-65 Megasite is disturbing, but rings true. In VW's defense, the Tanner interchange is critical to the megasite (its only existing access is on U.S. 31), and all along VW has been emphatic about its tight timeline. VW may have figured there were too many governmental entities involved in the Tanner interchange for it to feel comfortable about any promised completion date. Even on the Greenbrier site, the state barely mentioned the Tanner interchange on Browns Ferry Road; instead, the focus was on upgrading Greenbrier Road, which involved state not federal money and an existing connection to I-565.

I'm a little skeptical of Riley's claim it was just too expensive. I agree that it was too expensive, but according to local officials Alabama gave VW everything it asked for in the negotiations after the formal offer. Also, it sounds to me like the TN governor knew by Friday -- the day after each state made its formal offer -- that Chattanooga had won. Yet local officials talk about a flurry of negotiations after Thursday's "final offers" went to VW. The odd thing, following this thought, is that Alabama was snookered but Tennessee was the victim. That is, VW had to play Alabama in order to maximize the offer from Tennessee.

All in all, I'm not sure cotton fields in Greenbrier are such a bad thing!

[eflash]

Jacoby said that Chattanooga plant will have gasoline, TDI (diesel) and hybrid powertrains.

I had not seen that statement from Jacoby. Do you recall where you saw it? Hybrid production would be a big deal.

[Hankster]

I had not seen that statement from Jacoby. Do you recall where you saw it? Hybrid production would be a big deal.

Here's an interesting article that has this statement: "Jacoby said the vehicles produced in Chattanooga will be offered in gasoline, hybrid and diesel versions." The article states that engines and transmissions are likely to be sourced from Mexico as VW invests about $1 Billion in facilities there over the next three years. It also states that a joint assembly operation between VW and Audi in Chattanooga is a definite possibility.

http://www.autonews.com/article/20080718/C...910917/1177/ANE

Also, announced in the Chattanooga paper today was that Chattanooga will become headquarters for North American manufacturing operations. This means about 400 white collars jobs for the Chattanooga area. This is definitely great news for Chattanooga.

[flith]

Here's an interesting article that has this statement: "Jacoby said the vehicles produced in Chattanooga will be offered in gasoline, hybrid and diesel versions." The article states that engines and transmissions are likely to be sourced from Mexico as VW invests about $1 Billion in facilities there over the next three years. It also states that a joint assembly operation between VW and Audi in Chattanooga is a definite possibility.

http://www.autonews.com/article/20080718/C...910917/1177/ANE

Also, announced in the Chattanooga paper today was that Chattanooga will become headquarters for North American manufacturing operations. This means about 400 white collars jobs for the Chattanooga area. This is definitely great news for Chattanooga.

That's the same article. As far as good news goes, here is another article that discusses VW future in relation to the US.

[Hankster]

That's the same article. As far as good news goes, here is another article that discusses VW future in relation to the US.

Thanks for posting the article. It states that it is most likely that VW will eventually be producing far more than the 150,000 vehicles per year that the initial investment will produce. It states that VW's plant in Chattanooga is the start of something big. I hope they're right. If so, we will be glad we lost out on the Toyota plant and had the opportunity to land the VW plant instead.

[flith]

In addition to the 20000 ft of office space VW is leasing around Enterprise South they have also announced that they will need more space for back office operations. They are looking at a varity of areas in Hamilton County including downtown Chattanooga. VW, in September, will begin looking at hiring people in construction, manufacturing, maintenance and body-shop work. VW will begin to pour concrete in November, and they are emphasing that suppliers need to be in the US to help with the Euro exchange rate.

[Hankster]

A report has been issued by the State predicting that VW will bring 11,477 jobs to the area and an additional $511 Million annually into the economy. More than $500 Million in incentives will be given VW over a 30 year period. That's a lot of incentives, but I think it will be well worth it. I hope the Chattanooga area plans well for all this growth. Cities that are not used to rapid growth sometimes get caught flat footed when rapid grow finally comes. We need to plow the added tax revenues into projects that will provide the necessary infrastructure to support this growth.

[MidTenn1]

On my way back from Texas the other day, I went through Jackson, Mississippi and noticed there is a whole lot of new growth on the north side stretching toward the huge Nissan factory about 15 miles out. There were brand spanking new hospitals, suburban office buildings, retail districts and even some mid-rise condos.

I wonder if the I-75 corridor will grow like that?

[Hankster]

On my way back from Texas the other day, I went through Jackson, Mississippi and noticed there is a whole lot of new growth on the north side stretching toward the huge Nissan factory about 15 miles out. There were brand spanking new hospitals, suburban office buildings, retail districts and even some mid-rise condos.

I wonder if the I-75 corridor will grow like that?

I think it's highly likely. A lot of the growth will almost certainly line up along I-75 between East Brainerd and Cleveland. Look for signicifant growth in the Collegedale and Ooltewah areas.

[Hankster]

After visiting Germany on a trip to entice supplier to the VW plant to the Chattanooga area, local politicians were very upbeat predicting that there will be companies locating here. However, no specifics were announced. It is generally believed that from 6,00 to 8,000 additional jobs will be realized.

[Hankster]

The Chattanooga Times Free Press reported today that Volkswagen plans to double the size of the Chattanooga assembly plan almost immediately after the first new cars roll off the assembly line in 2011 from a capacity of 150,000 cars per year up to 300,000. It also reports that the capacity could eventually reach 595,000 vehicles per year. Audi still is looking to build a US assembly plant, and the possibility still exist that they will locate at Enterprise South as well. The total impact to the region of VW could one day be staggering. Here's the article from the Times Free Press.

VW Signals Expansion After First Cars Roll

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The Chattanooga Times Free Press reported today that Volkswagen plans to double the size of the Chattanooga assembly plan almost immediately after the first new cars roll off the assembly line in 2011 from a capacity of 150,000 cars per year up to 300,000. It also reports that the capacity could eventually reach 595,000 vehicles per year. Audi still is looking to build a US assembly plant, and the possibility still exist that they will locate at Enterprise South as well. The total impact to the region of VW could one day be staggering. Here's the article from the Times Free Press.

VW Signals Expansion After First Cars Roll

It seems to be a good thing Chattanooga missed out on the Toyota plant. Toyota has announced that the new Mississippi plant will be mothballed until further notice.

[Hankster]

It seems to be a good thing Chattanooga missed out on the Toyota plant. Toyota has announced that the new Mississippi plant will be mothballed until further notice.

That's true indeed. Chattanooga was lucky NOT to get that plant. It's amazing how things can change. I was really bummed out when Tupelo got that plant, and now I'm glad. Who would have thought this could happen?

[flith]

I was in Chattanooga for the holidays and noticed that there is a rampant rumor that the VW plant is canceled or will be canceled, despite the ongoing preparations. (VW's temporary Chestnut Tower offices downtown, announcement of official ground breaking in March, the announcement of the company from Michigan that will build the paint shop double the original size, among other hiring and job fair announcements) Latest update from the chattanoogan.com: This article announces the formation of "Volkswagen Group of America Chattanooga Operations, LLC" VW's newest manufacturing company, latest rendering of the plant, procurement orders have been issued for the paint shop, 10 meeting with suppliers are scheduled, and that "with an 18 percent downturn in automobile sales for the U.S. market in 2008, Volkswagen Group of America sales remained close to its 2007 totals, he said. As a result, the company's U.S. market share increased more than 20 percent. Additionally, Volkswagen Group globally saw an increase in overall sales in 2008."

They keep citing the economy, but overlooking the fact that the main reasons for the plant are: the Dollar to Euro exchange rate. ($1=0.6785 Euros as of today) and the that the Mexican plant is at capacity.

I feel one thing many fail to take into consideration is that VW has such a small market share in the US (in 2008, VW sold 223128 cars, with a market share of 1.7%) there really is nowhere to go but up despite the economy.

Has anyone else heard these rumors? I really don't see anything that seams "fishy."

[flith]

Somewhat related to the Chattanooga VW plant is the potential Audi expansion. The most recent US figures for Audi indicate a 4% drop in sales while globally their sales are up 4.1% for the year.

I feel this is potentially good news on the future Audi expansion in the US. They are believed to be considering adding a line at the Chattanooga VW plant. (Again the dollar to euro exchange rate makes the US favorable for expansion)

[Hankster]

I do not believe any of the rumors concerning VW not building. These rumors are simply the result of Toyota's announcement that they were delaying their Tupelo project. Unlike Toyota, VW is making money, the stock market value is the highest in the world, and I have every reason to believe the article you posted in the Chattanoogan that VW will go forward with this plant. I can't to see this huge plant built, and if it includes an Audi line as well.......WOW!

[flith]

Work begins tomorrow on the $30 Million paint shop. Foundation should be laid by the end of the week.

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Sketch of the new model to be produced in Chattanooga

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Official ground breaking March 14, 2009

[flith]

Somewhat related to the Chattanooga VW plant is the potential Audi expansion. The most recent US figures for Audi indicate a 4% drop in sales while globally their sales are up 4.1% for the year.

I feel this is potentially good news on the future Audi expansion in the US. They are believed to be considering adding a line at the Chattanooga VW plant. (Again the dollar to euro exchange rate makes the US favorable for expansion)

Stefan Jacoby has told Bloomberg news that Audi may produce vehicles in Chattanooga. No final decision has been made yet but Euro/Dollar exchange rates remain favorable for US production. VW Chattanooga's 2 million-square-foot plant is designed to build an initial 150,000 cars a year. However, VW is adding 43,000 square feet to the assembly area's 775,000 square feet, and it already has bolstered the size of the paint shop. VW stated in its Foreign Trade area application that it can double Chattanooga manufacturing to 5 million square feet if that capacity is needed. A sport utility vehicle is also rumored. No matter what the exchange rate dictates that as much N. American production as possible must take place in Chattanooga since Mexico is at capacity.

[flith]

VW is seeking LEED certification for the plant now. Audi production is still under consideration.

[flith]

Here's an interesting article that has this statement: "Jacoby said the vehicles produced in Chattanooga will be offered in gasoline, hybrid and diesel versions." The article states that engines and transmissions are likely to be sourced from Mexico as VW invests about $1 Billion in facilities there over the next three years. It also states that a joint assembly operation between VW and Audi in Chattanooga is a definite possibility.

http://www.autonews.com/article/20080718/C...910917/1177/ANE

Also, announced in the Chattanooga paper today was that Chattanooga will become headquarters for North American manufacturing operations. This means about 400 white collars jobs for the Chattanooga area. This is definitely great news for Chattanooga.

Rumors are starting to come out that VW may be building a second North America engine plant for the Chattanooga Plant. Peter Schmidt, editor of European newsletter Automotive Industry Data is quoted in a Times Free Press article stating "The old European Passat couldn't compete on costs; but now with the new plant (in Tennessee) and the new medium-size sedan being made there, VW should be able to compete with Accord and Camry. And I think there's a chance the engines might be made there, too," The question where is there is he referring to Chattanooga, Tennessee, United States, or North America. The Times Free Press also had an article on Apr 18th about Canada competing for the plant apparently The Globe and Mail newspaper in Toronto reported Friday that Ontario's government will be bidding for the engine or transmission plant. Experts believe that if VW looks only at incentive packages the plant will go the the US.

[flith]

emg CarTech has quoted Thomas Loafman, director of purchasing for Volkswagen Group of America as saying VW as choosing Chattanooga for it's engine plant. Local VW officials deny the selection and say it's a misquote.