Volkswagen Expected To Create 2,000 New Jobs In Chattanooga, But At A Hefty Price

Sen. Bob Corker at a press conference on Monday about Volkswagen’s expansion plans. (Photo credit: Corker’s Office)

Volkswagen plans on building a new SUV at its plant in Chattanooga, an investment the German automaker says is worth $900 million and could create 2,000 new jobs. The expansion comes as VW experiences sagging sales in the U.S.

The announcement closes months of speculation about whether the automaker will add the new line in Tennessee or Mexico.

It also follows a contentious union vote in February in which workers narrowly rejected a push by the United Auto Workers to unionize the plant. After the defeat, the UAW accused Republican lawmakers of interfering in the vote. The Chattanooga site remains VW’s only non-union plant.

At a news conference in Wolfsburg, Germany, CEO Martin Winterkorn said the new SUV line will start by 2016 at a plant that currently produces the Passat.

“With the Chattanooga plant and the U.S. Passat we have laid a sound foundation for further growth, but we also know of course that this is not sufficient, and for this reason, we are now taking the next step,” Winterkorn said.

Tennessee officials all but said that economic incentives were tied to the union vote failing in Chattanooga. The original incentives package, which expired since VW and Tennessee officials couldn’t reach a deal, offered around $300 million. The Chattanooga Times Free Press reports that the total incentive package might actually exceed $300 million — not to mention the millions the plant already received in 2008. “For each full-time job Volkswagen has created so far in Chattanooga, the car maker has received more than $200,000 in credits, grants or infrastructure improvements paid for by government,” according to the report.

Though the formal union vote didn’t muster enough votes to pass, the UAW announced last week the formation of a union, but membership is voluntary and it would not be formally recognized by VW.

Sen. Bob Corker, the former mayor of Chattanooga, said at the press conference on Monday that when VW came to Tennessee six years ago, it was the greatest day of his public service.  “Chattanooga has been changed forever because of your announcement,” he said.

VW CEO Winterkorn said he hopes the company can sell 800,000 vehicles over the next four years. Yet as the sale of other vehicles climb in the U.S., VW has witnessed sales drop 7 percent last year and they’re down an addition 13 percent in the first half of 2014.