Volkswagen Goes South for U.S. Assembly Plant

Volkswagen Goes South for U.S. Assembly Plant

By Bill Visnic

Ending speculation that began last year when Volkswagen Group officials confirmed the company was planning an all-new assembly plant in the U.S., the Volkswagen Group of America announced this week the plant will be built in Chattanooga, TN.

VWoA says in a release the new plant, adjacent to the vital I-75 north-south transportation corridor, will have capacity for 150,000 units and one of the products will be "a new midsize sedan designed specifically for the North American market."

It is likely that car will be a revisitation of today's Passat, a mainstream family sedan in Europe that has not performed particularly well in the U.S. Last year, VW sold just 37,183 Passats. In the first six months this year, VW moved 19,792 Passats versus 239,881 Toyota Camrys, one of the Passat's best-selling rivals.

In Europe, the Passat is a quasi-premium car, but it is believed VW plans a less-extravagant, less content-heavy - and therefore less-expensive - Passat for the U.S. market to better compete with the embedded Japanese and domestic midsize-sedan competition.

Volkswagen says production at the new Chattanooga plant will begin in early 2011, which would seem to align the new plant to produce the next-generation "B7" Passat expected to launch in calendar year 2012.

It also has been speculated VW might use the plant to assemble a B-class model to address North America's expanding concern with fuel economy. Competitors such as Honda and Toyota already have viable entrants, the Fit and Yaris respectively, in the segment, and domestic competitors Ford Motor Co. and Toyota Motor Corp. also are lighting off a number of new-model programs to serve that rapidly expanding market.

Volkswagen has a number of options for a potential B-Class car like its existing Polo - or a something more radical, such as a production version of the Up! minicar, a vehicle that could be at the forefront of a potential move in the U.S. for low-cost city cars to challenge the Smart Fortwo and other possible rivals.

Volkswagen might also derive benefit from building the Jetta, currently its best-selling model in the U.S., at the new Chattanooga plant. The Jetta currently is sourced from VW's well-established Puebla, Mexico assembly plant.

As for the choice of Chattanooga, VW seems placed to perhaps take advantage of a German-American supplier base already constructed to serve Germany-based competitors Daimler AG's Mercedes-Benz unit and BMW AG. Chattanooga is 275 miles via Interstate to the BMW AG assembly plant in Spartanburg, SC and is a more direct 200 miles northeast of the Daimler AG Mercedes-Benz assembly plant in Tuscaloosa, AL.

Near both BMW and Mercedes-Benz assembly plants, numerous Tier 1 and smaller suppliers have built facilities to make components for the vehicles built in Tuscaloosa and Spartanburg. And both companies have dramatically expanded the assembly plants in order to escape the same currency-exchange vagaries that dictated VW also build an assembly plant on U.S. soil.

The new plant also is considered a must-have if VW is to have any chance of delivering on a promise to hike U.S. sales more than three-fold, to 800,000 units, by 2018. Last year, VWoA sold 230,572 vehicles in the U.S.

Photos:

1. Midsize Passat has unique German flavor, but has not connected with U.S. customers.

2. The Space Up! concept car is an idea that might have potential for the U.S., bridging the area between mega-small minicars and more-realistic-for-the-U.S. subcompacts such as BMW's successful Mini.

Bill Visnic:  is an AutoObserver Senior Editor. Follow @AutoObserver on Twitter