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Chattanooga vwroom vwroom
Volkswagen Chooses Tennessee Site for New U.S. Plant
By Chad Thomas and Chris Reiter
July 15 (Bloomberg) -- Volkswagen AG, Europe's biggest carmaker, plans to build a plant in Chattanooga, Tennessee, resuming manufacturing in North America to help end more than five years of losses in the world's largest automobile market.
The supervisory board approved an investment of as much as $1 billion in the factory, which will begin production in early 2011 and initially build a midsized sedan developed for the U.S. market, Wolfsburg, Germany-based Volkswagen said today in a statement on its Web site.
The plant will be Volkswagen's first in the U.S. since it closed a factory in Westmoreland County, Pennsylvania, in 1988. Producing vehicles in the U.S. is part of Chief Executive Officer Martin Winterkorn's strategy to boost sales and reduce the effect of the dollar, which fell to a record low against the euro today, making VW cars more expensive in the U.S.
``Volkswagen needs the factory to reduce its exposure to the dollar and develop products for the U.S. market,'' said Georg Stuerzer, a Munich-based automotive analyst with Unicredit.
The Chattanooga plant will have an initial capacity of 150,000 vehicles and will include body production, a paint shop and assembly operations, Volkswagen said. The Tennessee site was selected from as many as 25 initial locations because it had a better infrastructure, good supplier base and a qualified workforce, the carmaker said, adding that it will employ 2,000 people at the factory.
Increasing North American sales is crucial to Winterkorn's plans to boost worldwide deliveries to 8 million vehicles in 2010 from a record 6 million last year and eventually matching Toyota Motor Corp. in sales and profitability. Volkswagen is the world's fourth-biggest carmaker, behind General Motors Corp., Toyota and Ford Motor Co.
The U.S. market is ``an important part of our volume strategy,'' Winterkorn said in today's statement. ``Volkswagen will be extremely active there.''
The German company's U.S. expansion will add pressure on GM, Ford, and Chrysler LLC, which are reeling as consumers turn away from gas-guzzling trucks and sport-utility vehicles. Volkswagen's first-half U.S. vehicle sales rose 0.6 percent, in contrast to a 10 percent industrywide drop.
Volkswagen, which has lost money in the U.S. since 2002, backed off in February from a target of breaking even in the country in 2009. The company sold 329,000 vehicles in the U.S. in 2007, giving it a 2 percent market share. Volkswagen estimates that it accounted for 9.8 percent of the worldwide car market last year.
The carmaker aims to triple sales in the U.S. to 1 million vehicles by 2018, including 200,000 delivered by the Audi luxury brand, and has begun designing models specifically for the market. Volkswagen's first U.S.-only vehicle was the Routan minivan, made jointly with Auburn Hills, Michigan-based Chrysler and introduced in February.
The German carmaker's only North American factory currently is in Puebla, Mexico, which supplies New Beetle and Jetta cars to the U.S.