* VW to create 2,000 new jobs at Chattanooga
* Aims to expand US lineup, revamp models more quickly
* Analyst says "right step" to cure lack of US progress
* VW declines comment on incentives from Tennessee
(Adds UAW, Tennessee senator comments, details on Tennessee
By Ben Klayman and Andreas Cremer
July 14 Volkswagen will spend $900
million to build a mid-sized SUV at its U.S. plant in Tennessee,
nearly doubling the factory's workforce, in an effort to
revitalise sales in the world's second-largest auto market.
VW said on Monday it had chosen its factory in Chattanooga,
Tennessee instead of a plant in Puebla, Mexico to produce a
seven-passenger SUV starting in late 2016, creating up to 2,000
jobs at the site that currently has almost 2,500 staff.
VW's $1 billion factory in Chattanooga started operating in
2011, building a cheaper, roomier version of the carmaker's
mid-sized Passat sedan specifically designed for American
Wolfsburg-based VW became the world's No. 2 auto
manufacturer last year, only trailing Toyota Motor Corp
thanks to sturdy sales growth in China.
But in the United States, sales of its core passenger-car
brand have been flagging since a 2011-12 surge that followed a
push into competitive mid-size vehicles. Sales of the VW brand
in the United States fell 7 percent last year and 13 percent in
the first half of 2014 even as the overall market is growing.
"I admit that we may have dedicated too much time to China,
Brazil and other states because the U.S. appeared to be working
extremely well," Chief Executive Martin Winterkorn said at a
press conference in Wolfsburg. "That's why we want to adjust
"The VW brand is going on the attack again in the U.S.,"
Winterkorn said. "The United States will remain one of the most
important markets for VW."
Troubles at the VW brand, which has been slow to refresh
models and plug gaps in its U.S. lineup, led to a change in the
carmaker's North American leadership where Jonathan Browning
quit as regional chief in January after about three years.
The new jobs at the Chattanooga factory will include about
200 positions in research and development and design to make
sure the vehicles cater to the needs of the North American
"VW has lacked understanding of U.S. customers' needs and
market dynamics," Stefan Bratzel, head of the Center of
Automotive Management think-tank near Cologne, said. "They're
taking the right step. Success in the U.S. is a must for them."
EXPANDED MODEL RANGE
Of the $900 million investment, $750 million will be spent
on production of the new SUV and the remainder on
infrastructure, a VW spokesman said. The state of Tennessee said
it awarded almost $178 million in financial incentives to secure
VW officials said unit production of the SUV would be in the
six-figure range. The vehicle will be sold in North America and
other markets, and built on the same platform as the Passat. The
Chattanooga plant built 130,000 Passat cars at its peak in 2011.
The overall mid-sized SUV market in the United States has
grown to more than 1.4 million vehicles from about 750,000 in
2009, VW said.
Michael Horn, VW's new U.S. chief, said at the press
conference the carmaker would further expand its model range in
the United States and has plans for more "derivative models." He
declined to elaborate.
The company will appoint a team of product management
officials in the second half of this year at the automaker's
U.S. headquarters in Herndon, Virginia.
From 2014 to 2018, VW will invest more than $7 billion in
the United States and Mexico. A 2007 goal to deliver 800,000
brand vehicles in the United States by 2018 - almost double last
year's total of 408,000 - is still realistic, Winterkorn said.
VW also said on Monday that Bernd Osterloh, chairman of the
Groups Works Council of Volkswagen, would join the board for the
automaker's American operations to give its work force more of a
voice in strategy planning.
U.S. Senator Bob Corker said in an interview the investment
would not have happened without the UAW's February loss.
"There's no question the path that we followed was the only
path that would have led us to this announcement," said the
Tennessee senator, a former Chattanooga mayor who helped first
lure VW to the state.
However, UAW Secretary-Treasurer Gary Casteel said in a
statement VW's announcement coming four days after the American
union's plans to open a branch in Chattanooga "reinforces the
consensus that the UAW has reached with the company."
VW officials said the decision on the SUV was not related to
the election loss in February by the United Auto Workers union.
Some anti-union forces had said the loss cleared the way for the
Tennessee plant to get the investment, while UAW officials said
VW workers were improperly influenced by anti-union statements
made by Tennessee Republican lawmakers and outside interest
The UAW said last week that it had formed a local union in
Tennessee for workers at the plant, taking another run at
representing some of the employees. VW officials said they had
no agreements in place with the UAW regarding its latest
VW officials have said they want the plant represented by
some type of German-style works council, which typically
includes both blue- and white-collar employees.
(Reporting by Ben Klayman and Andreas Cremer.; Editing by
Louise Heavens, Jane Merriman and David Evans)