VW building U.S. assembly factory during hard times

“We have stuck with our goals of growing our sales in the U.S. market,” Volkswagen AG spokeswoman Jill Bratina said. “This plant is critical to that.”

Since Volkswagen announced plans to build the plant in July, the global economy has been deflating. Following the housing, credit and financial crises in the United States, the possible collapse of General Motors Corp. or Chrysler LLC would likely drag down some auto suppliers and manufacturers of steel, aluminum, electronics and plastics.

Bratina said the company is “absolutely not” having any regrets about the timing of the Chattanooga plant. Volkswagen is also building assembly plants in Russia and India.

South Korean carmaker Kia Motors Corp. plans to open an assembly plant at West Point, Georgia, in 2009, and Japanese company Toyota Motor Corp. said earlier this month that it is sticking with plans to open its new plant at Blue Springs, Mississippi, in 2010. They will join other foreign automakers like Nissan Motor Co., Honda Motor Co. and BMW AG that have opened plants in the southern U.S.

Not only are VW executives sounding spirited about the early 2009 groundbreaking for the Chattanooga plant that will employ about 2,000 people, they already have expanded the planned size of the site’s paint shop to accommodate 1,000 vehicles per day instead of 650 when production starts in 2011.

The plant will be able to make 150,000 vehicles a year when it opens, but Volkswagen already is planning to start construction in 2011 of a second phase that would increase capacity to 592,000 vehicles a year.

Building a new sedan in Chattanooga is part of VW’s plan to expand sales in the U.S. to 1 million a year by 2018, or more than four times the number sold last year. Volkswagen has sold 191,255 vehicles in the first 10 months of 2008, less than a 1 percent decrease from the same period last year, while U.S. auto sales overall have fallen 15 percent.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan, said Volkswagen’s timing appears sound, even though the global economy has drastically changed since the company’s July announcement and the value of the euro has fallen, eroding the cost advantages of manufacturing in the U.S.

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