Gabe Nelson
Gabe Nelson
Silicon Valley, Tesla, Hyundai, Kia, Mazda and Mitsubishi

VW may be ready to give its SUV a home

Other blogs
Related Topics

WASHINGTON -- Volkswagen AG could be a few days away from naming a North American assembly site for a mid-sized crossover based on the CrossBlue concept from the 2013 Detroit auto show.

Volkswagen’s supervisory board, the company’s top decision-making body, is slated to meet May 12, company sources tell Automotive News, and anticipation is building at Volkswagen Group of America’s headquarters in suburban Washington and at VW’s assembly plant in Chattanooga, which is seen as a leading contender for the production order.

The decision may not come next week. VW’s board keeps its cards close to the vest. “I don’t even know if it’s on the agenda,” one top U.S. executive said.

But the stars seem to be aligned.

VW readily concedes it needs a family-sized vehicle like the seven-seat CrossBlue, which rivals the Honda Pilot and Toyota Highlander, to have a prayer of meeting CEO Martin Winterkorn’s goal of selling 800,000 units in the U.S. market by 2018. Winterkorn announced in January that the crossover will go on sale in 2016.

It takes two years to set up an assembly line. And the meter is running.

The plant in Chattanooga, which builds the Passat, has long been VW’s preferred site. Adding another product to the site would lower per-unit costs and make VW more profitable.

Sure, the crossover could go to Mexico. VW has drawn up a business case for that. But if any product is suited for Chattanooga, executives say, it’s the crossover, which would be sold mainly in the United States and Canada.

The last obstacle, insiders say, is the subsidies.

Tennessee offered VW $300 million in incentives last year, leaked documents show, but pulled the offer when VW didn’t resist a UAW drive to organize workers at the Chattanooga plant. Now that the UAW has lost its election, and withdrawn an appeal challenging the result, that sticking point has been removed.

But it’s still not clear where the package stands. A spokesman for Gov. Bill Haslam deferred questions to the Tennessee Department of Economic and Community Development, which signaled that recent efforts to meet with VW executives have been fruitless.

“We’ve talked to the company about a meeting, but nothing is scheduled at this point,” Clint Brewer, the agency’s assistant commissioner for communications and marketing, wrote in an e-mail to Automotive News.

By this point, VW’s board members have a pretty good sense of what Tennessee is willing to offer them. Will they take the offer, or send their crossover south of the border to Mexico?

Within a few days, we may know the answer.

You can reach Gabe Nelson at gnelson@crain.com.

Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

Or submit an online comment below. (Terms and Conditions)