Home » Volkswagen will build new factory as part of $7B investment in North America

Volkswagen will build new factory as part of $7B investment in North America

Kentucky would seem a logical location for new VW plant

DETROIT (Jan. 14, 2014) — Volkswagen (OTCPK:VLKAF) intends to build a new North American factory as part of plans to invest $7 billion in the continent over five years to lift annual sales from 600,000 to 1 million, its chairman told the media Sunday in Detroit.

The Wall Street Journal and other media reported comments by Prof. Dr. Martin Winterkorn, CEO of Volkswagen Aktiengesellschaft, who announced the North American investment program Sunday on the eve of the North American International Auto Show (NAIAS).

Workers at the Volkswagen manufacturing facility in Chattanooga conduct a quality check in the paint shop on a Passat.
Workers at the Volkswagen manufacturing facility in Chattanooga conduct a quality check in the paint shop on a Passat.

Volkswagen has a factory in Chattanooga, Tenn., where it makes the Passat since that $2 billion facility opened in 2011. City and county leaders in Chattanooga already are abuzz and pushing for Volkswagen to bring production of its CrossBlue midsized SUV there, according to a report on the WRCBtv.com. Bloomberg News has reported that Volkswagen has already chosen Chattanooga over a Mexican plant.

Winterkorn said Sunday in Detroit only that the German vehicle maker plans to bring its midsize SUV to the North American market as soon as it can.

“Volkswagen’s midsize SUV for America is on its way!” he said, according to a news release by the company.

VW also intends to design a seven-seater sport utility vehicle specifically for the region as it looks to increase overall U.S. sales, which have seen fast growth in recent years but fell in 2013.

Kentucky, already the No. 3 state in U.S. light vehicle production with four vehicle assembly facilities and 450 supplier operations, would seem to be a logical location for the new North American VW plant. German vehicle supply operations have been a key target for state foreign direct investment recruiters the past couple of years, and there have been multiple announcements of Germany companies expanding into Kentucky.

The state owns a 1,550-acre industrial site in Glendale, Ky., just south of Elizabethtown on Interstate 65 and has been marketing it as a prime location to vehicle makers for the past decade.

In the company’s news release on the CEO’s comments, Winterkorn emphasized that the Volkswagen Passenger Cars brand was today better positioned in the US than ever before, adding that the production start of the new Golf “made in North America” would give the Volkswagen brand a further boost. He underscored that the Golf had never been so innovative or so efficient: “The new Golf features the latest generation of our TSI and Clean Diesel engines as well as electric drive and plug-in hybrid technology.”

Production for the North American market of one of the most successful Volkswagen models begins today at the plant in Puebla, Mexico, with the market launch scheduled for the summer.

That is just one building block in a multibillion-dollar investment program the company is initiating for the region. According to Winterkorn: “As a Group we will be investing over seven billion dollars in North America over the next five years.” Another element in the growth strategy is an attractive brand-new model designed specifically for North America. In the presence of 350 guests in Detroit, Winterkorn announced: “I’m delighted to confirm what so many have been waiting so long to hear: Volkswagen’s midsize SUV for America is on its way.” He stated that development work on the seven-seater had already begun and that the US market launch was scheduled for 2016.

In light of this, the CEO made it very clear the Group’s plans remained unchanged: “We have set our goal: Volkswagen Group of America aims to sell one million Volkswagen and Audi cars per year in the US by 2018. We are taking up the challenge – with confidence, total commitment and the necessary staying power.”

Winterkorn said the Volkswagen Group was now also a force to be reckoned with on the key U.S. market, and cited the Group’s success as evidence of this: “The Group has almost doubled unit sales in the US since 2008, setting a new record of over 600,000 deliveries in 2013.”

He went on to say that in the premium segment in particular, there was already no getting past the Volkswagen Group in North America: “Audi, Porsche, Bentley, Bugatti and Lamborghini – five of the strongest premium brands ever.” Winterkorn commented that Audi had gone from record to record in the past 36 months and was now moving up another gear with models such as the Q3 and the A3 Sedan to be launched in the US this year as well as its own production plant in San José de Chiapa, Mexico. “And the Porsche legend in the US has never been stronger. Sales reached an all-time high of over 40,000 vehicles in 2013”, Winterkorn said, adding that Porsche would be launching a promising new model with the new Porsche Macan.

“We want many more American drivers to feel at home with our Group brands and are working to achieve that with one hundred percent commitment and plenty of passion,” Winterkorn said on the eve of North America’s most prestigious auto show.

The United Auto Workers union is attempting to organize the Chattanooga plant and says it has enough signed cards to prompt a vote by the 1,500-plus workers there, according to a timesfreepress.com report.