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VW inaugurates Tenn. plant geared to US market

VW inaugurates Tenn. plant geared to US market

May 25th, 2011 by KRISTIN M. HALL, Associated Press in News

CHATTANOOGA, Tenn. (AP) - Volkswagen is jumping into the U.S. auto market with a domestically built Passat that is bigger and cheaper, bidding to break into the competitive midsize sedan market.

At the grand opening of its new plant in Chattanooga, the German automaker presented the 2012 Passat on Tuesday as the key to building U.S. sales to 1 million units by 2018. The factory has been producing cars since April and Volkswagen officials took the opportunity to show off both their German-designed sedan and the $1 billion plant.

The new Passat will go on sale in the third quarter for $20,000 a car. That's about $7,000 cheaper than current models built in Germany and close to the prices of such competitors' models as the Ford Fusion, the Toyota Camry, the Honda Accord and the Hyundai Sonata.

Jonathan Browning, president and chief executive officer of Volkswagen Group of America, said the automaker wants to make German engineering more accessible to North American buyers.

"The Passats produced here in Chattanooga will be a key enabler to our growth, allowing us to compete in the core of the midsize sedan segment," Browning told reporters before the unveiling of the plant.

Volkswagen intends to produce 150,000 sedans annually at Chattanooga for the American market, a big jump for a car that has only sold a peak of 80,000 units annually in the U.S. in its history. Analysts say high production is needed if they are to keep pace with competitors.

Rebecca Lindland, senior analyst for IHS Automotive, said the best-selling brand in the market, the Toyota Camry, is expected to sell 350,000 units next year.

"One of the big obstacles that Volkswagen faces is that people know of the brand, but don't necessarily think of the brand when buying a car," Lindland said.

The carmaker is trying to change that with the Passat, which was featured in a popular Superbowl commercial with a youngster in a Darth Vader costume. The actor, 8-year-old Max Page, was on hand in Chattanooga to open the factory doors for tours.

"Das auto is finally back in the States," declared Martin Winterkorn, chairman of the board of management for Volkswagen AG, the parent company of Volkswagen.

Being the only European brand in the crowded pack may be the Passat's selling point.

The 4-door sedan is offered with either diesel or regular gasoline engines, comes standard with dual-zone climate control and Bluetooth features. The diesel version boasts 43 mpg on the highway and the standard version, 32 mpg for a 2.5-liter.

The plant itself has such energy-efficient design measures as LED lighting and rainwater recycling. Frank Fischer, who heads VW's Chattanooga plant, said the complex uses 35 percent less energy than a standard automotive plant.

Lindland said diesel car sales have increased 48 percent in the year to date, as consumers look to European brands for better fuel efficiency - even higher than hybrid car purchases, which rose 25 percent in the same period.

Transportation Secretary Ray LaHood said at the grand opening that consumers are seeking out cars that not only save them money on gas, but also contribute to the national economy and curb the effects on the environment.

"We know that clean diesel is one ingredient in the recipe for our long-term energy security," he said.

When Volkswagen selected Chattanooga as the site of their new American plant, they knew that the only way to make a dent in the US car market was producing American cars, said Fischer.

"You have to be a local producer to also be in the market," said Fischer.