DETROIT -- Volkswagen AG Chairman Martin Winterkorn today reaffirmed the VW brands commitment to build a factory in Chattanooga, Tenn., despite a weak U.S. new-vehicle market and recent swings in the dollar-euro exchange rate that reduce the incentive to build vehicles in the United States.
People keep asking me, Why are you investing $1 billion in a U.S. plant now, of all times? My answer is simple and clear, Winterkorn said during a press conference here at the auto show.
The automobile will always be an essential part of the American way of life, and we believe in a promising future for Volkswagen in the great car nation that is America.
Volkswagen called a press conference for tomorrow in Chattanooga, where it will give an update on the plant. The Tennessee factory is slated to begin production of a mid-sized sedan there in early 2011.
Last July, VW announced Chattanooga as the site of its first U.S. factory in more than 20 years. Since then, the U.S. market has collapsed, prompting some to speculate that VW might reconsider its plan.
In 2008, U.S. new-vehicle sales fell 18.0 percent to 13.2 million units, the steepest one-year plunge since 1974.
Volkswagen Group of America didnt fall as sharply, dropping 4.4 percent to 313,581 sales. The VW brand slipped 3.2 percent to 223,128.
At the same press conference, Volkswagen Group of America CEO Stefan Jacoby said VW is moving full speed ahead in Chattanooga, where construction began last November.
Im here to tell you that Volkswagen has a plan in place for our future success in this market, and we will not waiver one inch from our long-term objectives, Jacoby said.
Building vehicles in the United States also offers a hedge against currency swings. But recent currency movements have reduced the urgency of those U.S. investments.
Last July 15, VW was booking 0.63 euros in revenue for every dollar received from U.S. sales. But today, a stronger dollar means that VW books 0.74 euros for every dollar, somewhat reducing the incentive to build cars in the United States instead of importing them from Europe.
In addition, Winterkorn repeated the worldwide VW groups commitment to invest up to 8 billion euros a year, or $10.78 billion at current exchange rates, to develop new products and eco-friendly technologies such as hybrids, electric cars and biofuel-powered vehicles.