G. Chambers Williams III

cwilliams1@tennessean.com

VW to invest %24600M in Chattanooga for SUV line%2C will add 2%2C000 jobs

Automaker also creating research and development center in Chattanooga%3B adding 200 engineers in Tennessee

Announcement follows establishment of local UAW branch aimed at VW workers

The South's auto industry continues its phenomenal growth, as evidenced by recent expansions expected to bring thousands of new jobs and billions of dollars in new investment — including a deal announced Monday that will bring production of a new SUV to the Volkswagen plant in Chattanooga.

With the Volkswagen win, Tennessee is now at the forefront of the industry's growth. Recent gains include a new Infiniti engine plant that opened this month in Decherd; a pending expansion that will add two new vehicles to the General Motors plant in Spring Hill; and projects over the past year that have brought new vehicles and significantly bumped up employment at Nissan's Smyrna plant.

The Volkswagen announcement of an expansion that will add 2,000 jobs in auto assembly and 200 in research and development was "pretty impressive," said Sujit CanagaRetna, fiscal policy manager for the Atlanta office of the Council of State Governments and a leading expert on the South's auto industry.

"I believe it reinforces that this region has become a real magnet, not only for new plants, but also for expansions," he said. "BMW in South Carolina is another great example. They've been there 20 years and have gone through five or six expansions, with the latest announced in March for $1 billion.

Volkswagen said it will expand its Chattanooga plant to begin building a new seven-passenger crossover utility vehicle by late 2016 and will also hire 200 engineers for a its new National Research and Development and Planning Center, the first for any automaker in the South.

In a joint announcement from Volkswagen's headquarters in Wolfsburg, Germany, and the Chattanooga plant, the world's No. 3 automaker said it would spend $900 million to introduce the new SUV, including a $600 million investment in Tennessee.

The new vehicle — based on VW's CrossBlue concept shown at the 2013 Detroit auto show — will be the second model for the Chattanooga plant, which has been assembling the U.S. version of the Passat sedan since the facility opened in 2011.

Already, Volkswagen has 1,500 direct employees at the plant, with about 2,700 altogether, including contractors. The new SUV will add 2,000 direct employees and thousands more associated with contractors and suppliers, said Martin Winterkorn, Volkswagen's chief executive officer.

Bringing the new SUV to Chattanooga is part of Volkswagen AG's strategy to reach its goal of selling 800,000 vehicles annually in the U.S. by 2018, Winterkorn said. The company sold just over 400,000 vehicles in the United States last year, and sales are down slightly from that level this year.

"The United States of America remains an important market for Volkswagen," Winterkorn said during the announcement from Wolfsburg. "We are now taking the next step: Volkswagen is expanding its commitment to the United States. A key role here will be played by Volkswagen's midsize SUV. It will be built by real Americans starting at the end of 2016."

Adding the crossover and the research center to the Chattanooga facility is a "signal of a long-term commitment from Volkswagen to the region," Winterkorn said.

"VW's investment is a vote of confidence in Tennessee and the supply base," said Tom Brewer, president of the Tennessee Automotive Manufacturers Association. "It means more high-quality jobs at the plant in Chattanooga and more jobs for the growing supply base across the state."

Brewer said the automaker's new research center "demonstrates VW's commitment to fostering automotive innovation in Tennessee. It signifies a step forward in moving Tennessee's automotive industry up the value chain, as we move from a world-class center for production to a hub for innovation excellence."

Last year, The Brookings Institution, a nonpartisan Washington think tank, said that "a key step in propelling the industry to the next level is increasing local innovation," Brewer said.

"As a result of the new research center, we are likely to see more suppliers conducting research and development as they work to integrate their products to VW's new designs," Brewer said. "It represents an evolution of the industry in Tennessee and ultimately means more high-paying, high-tech jobs."

The sprawling Volkswagen plant, built in north Chattanooga on the site of the former Volunteer Army Ammunition Plant, has a current production capacity of 150,000 vehicles a year. The expansion would add about 538,000 square feet of floor space to accommodate assembly of the new vehicle, and nearly double production capacity, the automaker said.

Monday's announcement followed months of speculation about whether the new line would be built in Chattanooga or at the automaker's only other North American plant, in Puebla, Mexico.

Reach G. Chambers Williams III at 615-259-8076 and on Twitter @gchambers3.