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Volkswagen Opens Chattanooga Plant

The plant, which received hundreds of millions in state and local incentives, has been presented as a prime example of how the state can attract businesses with a huge capacity for hiring. Volkswagen says the Chattanooga location will be key to its long-term success in the U.S.

Volkswagen formally unveiled its automotive manufacturing plant Tuesday in Chattanooga. Company officials say the facility, built on one of the state’s taxpayer-financed economic development megasites, will boost its efforts to make a major impact on the national automotive market.

“The Chattanooga plant really does represent a very significant commitment toward our overall U.S. product strategy,” Jonathan Browning, president and CEO of Volkswagen Group of America Inc., told a huge room of people at an elaborate press conference at the plant. “This is a strategy we’ve talked about for some time. It’s a strategy that represents an investment of $4 billion into the U.S. market. It’s a key driver of our long-term success in the United States.”

Volkswagen is building the Passat, a midsize sedan, at the Chattanooga plant. Company officials said the car will get 43 miles per gallon on the highway and can provide nearly 800 miles on a single tank of gas. While Tuesday marked the grand opening, the plant has already assembled test cars and customer cars, and the first customer car rolled off the assembly line April 18.

Dignitaries at Tuesday’s event included Gov. Bill Haslam as well as the German ambassador to the United States, Klaus Scharioth. The plant currently has 1,700 workers and will have more than 2,000 employees when fully staffed, Frank Fischer, head of the Chattanooga plant, said.

The plant has been presented as a prime example of how the state can attract businesses with a huge capacity for hiring. Bill Hagerty, commissioner of the state Department of Economic and Community Development, said Tuesday he will travel next month to Germany to talk to Volkswagen officials and will visit other car manufacturers there for further recruitment.

Hagerty said recent reports that the State of Tennessee, under Haslam, will emphasize expansion of existing businesses rather than seeking to attract big businesses like Volkswagen, were somewhat misleading.

“It’s not a ‘rather than.’ It’s ‘in addition to,'” Hagerty said. “We actually are beefing up the department that does these large sort of home-run activities. We’ve still got four overseas offices.

“We are adding more resources at the local level on focusing on existing businesses, so it’s a resource addition on the recruitment side of our department altogether.”

When Fischer said Volkswagen hopes to expand its number of suppliers to the plant, Hagerty noticeably applauded.

Haslam was quick to give credit to former Gov. Phil Bredesen and Bredesen’s team of business recruiters for their work landing the Volkswagen plant that held its grand opening in Chattanooga on Tuesday.

“I must confess to you, I feel a little bit like someone who got to jump in and run the last mile of the marathon after other people had run the first 25,” Haslam said.

“I can’t help but acknowledge the contribution of my predecessor, Governor Bredesen, and his team who worked hard to make certain this happened.”

Haslam also gave credit to leaders in Chattanooga and Hamilton County for their work in attracting the German automaker to Tennessee. Deputy Gov. Claude Ramsey attended Tuesday’s opening and kept a low profile, but he was Hamilton County mayor before joining Haslam’s administration.

“Good things like this don’t just happen,” Haslam said. “You have to have people willing to stick out their necks and make the investment as local government both in buying the site and preparing it, and then the state to come in with additional infrastructure with the interchange back to the interstate.

“I get to be the lucky person who gets the baton at the last minute and runs across the finish line, but I do that in full knowledge that other people worked really, really hard to get us to this day.”

The Volkswagen plant represents a $1 billion investment by the company, and the plant sits on one of the state’s three megasites geared toward economic development.

Only a day before, Haslam presided over the first meeting of the West Tennessee megasite board, which hopes to attract a large business to a site in Haywood County. The state’s other megasite is in Montgomery County, where Hemlock Semiconductor operates a solar plant, another $1 billion investment that has already led to further expansion.

State and local taxpayers have contributed hundreds of millions of dollars in incentives toward luring Volkswagen to Tennessee, with one estimate in 2008 putting the figure above $500 million. The land at the Enterprise South site in Chattanooga was purchased for a reported $81 million, and a reported $43 million went for connections to highways and roads.

Volkswagen has a presence at 30 locations across the United States.

Browning said the Passat will play a major role for the company.

“The Passat produced here in Chattanooga will be a key enabler of our growth and will allow us to compete very much in the core of the midsize sedan segment here in the U.S., the largest single car segment in the U.S.,” Browning said.

“You could say the future for Volkswagen begins here in Chattanooga.”

The Passat is expected to be one of two high-volume vehicles the company makes in this country, the other being the Jetta.

The plant’s opening comes after Volkswagen announced in July 2008 that it was choosing Chattanooga from nearly 400 potential sites, with the aim of making 150,000 midsize sedans each year.

Construction of the plant began in February 2009. The first robots for making cars were in place by February 2010. The company is emphasizing attention to having an environmentally friendly plant. Among the techniques toward that end is collecting rainwater from the roof for use inside the plant cooling welding guns. Fischer said the plant will use 35 percent less energy than a standard automotive plant.

Much was made Tuesday of promises being kept, both by Volkswagen and by state and local governments. Much was also made of the potential for attracting suppliers for the plant, which can greatly enhance the economic impact of the facility.

“If you talk to their management team, to a person, they say Tennessee has delivered on what they said they would. Of course, we feel the same way,” Haslam said. “They said they would have a $1 billion plant and have it open in three years, and they did it.”

Haslam said his two daughters, Leigh and Annie, as well as daughter-in-law Hannah, have Volkswagens. When asked why there are so many Volkswagens in the family, Haslam said simply, “It’s what my daughters wanted.”

Browning said one of the things that stood out to Volkswagen officials has been the enthusiasm and attitude of the local people, whether they were public officials or residents. He explained that last September when Volkswagen was launching a new Jetta and had 650-700 Jettas in Atlanta for a dealers’ meeting, the company wanted the dealers to see the Chattanooga plant. Dealers drove the Jettas from Atlanta to Chattanooga. A local radio station picked up on it, and it led to a reaction.

“Spontaneously, local residents came out, standing on bridges on overpasses over the highway with ‘Welcome Volkswagen’ signs, showing a true sense of enthusiasm about Volkswagen coming to the local area,” Browning said. “That’s a perfect example, not just from the official level but also the individual level. The community is very enthusiastic about Volkswagen coming to the area.”

Ramsey said the plant is a success story.

“It just tells me the right things are happening,” Ramsey said. “It can happen again. It just takes time and patience.

“It means the future is very bright here.”

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