VW Plans $340 Million Expansion at Tennessee Plant
March 19 2018 - 12:38PM
Dow Jones News
By Adrienne Roberts
Volkswagen AG will spend $340 million to manufacture a new
sport-utility vehicle at a Tennessee assembly plant, according to a
person familiar with the plan. The move is the latest in a string
of investments planned by foreign auto makers in American factories
that could help offset the pain of a potential trade war.
The plan is part of the German auto maker's increased bet on
SUVs, a strategy VW hopes will approximately double its U.S. market
share to 5% in coming years. While a dominant player on the global
stage, Volkswagen has been slow to embrace trends that Americans
follow and has long trailed Japanese and Korean car companies in
the U.S.
Volkswagen officials are expected to announce a capacity
expansion at an event planned for Monday afternoon in Chattanooga.
Volkswagen previously invested $900 million in the plant to build
the Atlas, a seven-seat SUV designed for the U.S. market. The auto
maker has been working to recover from a costly diesel-emissions
scandal that hit in 2015 and forced Volkswagen executives to draw
up a new strategy.
Volkswagen's deeper U.S. commitment comes amid intense political
scrutiny on where auto makers build cars that are sold to U.S.
buyers. President Donald Trump has criticized car companies that
import vehicles into the U.S. and face little penalty, while
praising several auto makers that have made U.S. investment
commitments within the past 15 months.
Mr. Trump's move to raise tariffs on imported steel and aluminum
could present a challenge for foreign car companies that rely
heavily on non-U.S. materials to make their cars and SUVs. By
locating more production in the U.S. or the North American Free
Trade Agreement zone, auto makers typically boost their use of
steel and aluminum coming from producers based in the U.S. or
Nafta.
Swedish auto maker Volvo said in September it would more than
double its investment in its first U.S. plant to $1.1 billion to
build its XC90 SUV. Around the same time, Daimler AG said it would
spend $1 billion to start production of a fully electric SUV at its
Alabama manufacturing operations.
Japanese auto makers Toyota Motor Corp. and Mazda Motor Corp.
are even building a new plant in the U.S. to add more capacity,
announcing in January a $1.6 billion plant in Alabama that Mazda
will use to build a new crossover SUV.
These investments are as routine as they are politically
expedient, as factories need to be modernized and vehicle platforms
change. Volkswagen, like many auto makers, uses the same
engineering platform for many of its vehicles, and its new SUV will
be built on the same platform and line as the seven-seat Atlas that
is available in dealerships now.
Production of the Atlas began in December 2016 at the Tennessee
plant, which has produced Passat sedans since opening earlier in
the decade.
Write to Adrienne Roberts at Adrienne.Roberts@wsj.com
(END) Dow Jones Newswires
March 19, 2018 12:23 ET (16:23 GMT)
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