Volkswagen made big news this week by announcing that it would build a new SUV at its plant in Chattanooga, Tennessee. Most automakers are moving away from producing vehicles on first-world soil, opting instead for cheaper bases like Mexico or Thailand. Volkswagen’s decision makes more sense when you realize that the profit margins for an SUV are high enough to subsidize the increased cost of U.S. business, as well as the fact that the company will save on shipping since the vehicle is meant primarily for the land of the free and home of the brave.
Details about the new model are scant, but multiple sources are saying that it will be a mid-size model, likely a crossover SUV, the soon-to-be most popular model type in the U.S. Michelle Krebs, senior analyst for AutoTrader.com, spoke to this saying, “This investment likely will address one of the glaring holes, an entry in the fastest-growing vehicle segment of small crossovers.”
This investment in the Chattanooga plant comes on the heels of Volkswagen sinking $25 billion into plants in China over the next four years. The Tennessee plant will receive $900 million and 2,000 jobs across the two years it will take to ready the new SUV.
One benefit that can’t be captured in dollars and cents will be the increased training in science and mathematics that many U.S. workers will receive. Chattanooga State University has been Volkswagen’s partner in vocational training since the plant first opened in 2011. American students have been noted for their declining science and mathematics skills compared to their peers around the globe.
Elsewhere in the world, VW CEO Martin Winterkorn said that the company needs to cut $6.8 billion from operating expenses. With 301 models in the family and a number of expensive German plants, it’s likely that the company will trim models and close European manufacturing areas to achieve its financial goal.
Overall, we’re excited for the new model and are pleased that it will be made in the USA. We’ll update when more information is available.