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 Southern Auto Corridor News

March 3, 2009

Volkswagen has to build Engines for its Tennessee Plant. Is South Texas the Place?

There’s news in the Rio Grande Valley that a European automaker is close to making a decision on building a large plant in or near McAllen, Tex. If true, who could that be in an economy like this? BMW? Mercedes? Fiat? Volkswagen? Fiat and Volkswagen would be the only two European automakers looking to add North American production in the near future.

It was reported in the spring of 2008 that Fiat was looking for a U.S. location to produce a new model. That quickly changed when reports indicated the Italian automaker was scouting Mexico for a plant. Then Fiat took a 35% stake in Chrysler, which is the kiss of death. Just ask Mercedes. That being the case, why would Fiat still seek a new North American assembly plant when it can set up shop at an idled Chrysler facility? 

Volkswagen? Now that makes sense. Volkswagen is full steam ahead on its Chattanooga, Tenn. assembly plant. In fact, that facility is on the fastest track we have ever seen compared to other assembly plants built in the Southern Automotive Corridor.

VW announced it was building a plant in Chattanooga in the summer of 2008. A large part of the facility will be built by the end of this year. In comparison, Kia announced its West Georgia plant in early 2006 and that Korean auto works won’t be churning out vehicles until the end of this year, or almost four years after it was first announced. Of course Toyota, which announced its newest facility in 2007, has put the brakes on its plant in Tupelo, Miss. even though construction is almost complete.

So why is VW so hell-bent on getting its plant up and running in Tennessee? Maybe because it believes it has a product that will be incredibly attractive to buyers. VW claims it has a sedan, built exclusively for U.S. customers that will get 55 miles per gallon.

According to published reports, officials with the city of McAllen, Tex. have been negotiating with an unnamed automaker for a large project. Those reports also indicate that one of the last remaining hurdles to complete the deal is a competitive incentive package. In fact, lawmakers in Texas are already trying to pass bills that will help land the project. When lawmakers start pleading with state government for money, usually the project is down to its final stages.

So, is the buzz from McAllen a Volkswagen project? Don’t know. But what we do know is this: VW admitted in the fall 2008 quarter that it has been looking at sites in Mexico for a new engine plant. And VW already operates a huge assembly (425,000 vehicles made last year) and engine plant (340,000 engines made last year) in Puebla, Mexico. Add the numbers up and there aren’t enough engines being produced at the Puebla plant, much less for the new plant being built in Tennessee.

Yes, VW needs engines for both its Mexico and U.S. plants. And McAllen, Tex., with a location between the two assembly facilities, just might be where the German automaker will build them.

Michigan Supplier Setting Up Shop in Cullman, Ala.

Royal Technologies, a Michigan-based auto parts supplier, announced in the winter quarter it will locate a facility in Cullman, Ala. that will house up to 400 employees. The company makes a variety of plastic parts for automakers and furniture manufacturers. It operates four plants in Michigan and the Cullman plant is the first outside of the company's home state. Royal will produce interior trim components for the automotive industry.

Federal-Mogul Expanding in Athens, Ala.

Federal-Mogul Sealing Systems plans to create 110 new jobs at its north Alabama Athens plant. The company will invest $21.7 million to install new equipment for a new product line. Federal-Mogul makes engine sealants, such as gaskets, at the Athens plant.

Honda Opens Alabama Engineering Facility

"Why in the world would you open an engineering center in the worst market for automobiles maybe any of us can ever remember" said Jim Wehrman, vice-president of Honda Engineering North America? "It's because that long-term dream is more important and more powerful than short-term business conditions." In the winter quarter, Honda opened and dedicated a new $6 million building on Honda's Lincoln, Ala. campus that will house a branch of Honda Engineering North America. The 14,000-square-foot facility will increase the Japanese automaker's support capability for improvements to equipment needs at its Alabama plant. 

VW Expects 20 Suppliers "In the Gate"

Frank Fischer, CEO of the Volkswagen Group, said in the winter quarter that the company expects to have at least 20 companies in a supplier area next to the main VW plant now being built at Chattanooga's Enterprise South Industrial Park. We call suppliers that locate next to an assembly plant "in the gate" operations and if 20 are expected for VW that would represent a higher number than what are typically found at assembly plants in the SouthernAutoCorridor (www.SouthernAutoCorridor.com). Furthermore, with overcapacity at so many parts suppliers located throughout the South right now, it might be difficult for some suppliers to justify new operations next to the VW plant. In other VW news, the German automaker expects its 400,000-square-foot paint shop to be "weather tight" by the end of September.

VW Forms Manufacturing Company for Tennessee

In January, the formation of the new manufacturing company that will operate at the German automaker's plant now under construction near Chattanooga, Tenn. was revealed. Volkswagen Group of America Chattanooga Operations LLC will operate the $1 billion facility. Frank Fischer, CEO of the company said at the announcement in Chattanooga that "2009 will be a big year for Volkswagen in Chattanooga and I am pleased with the continued progress we have made at the plant. With the formation of the manufacturing company, the architectural renderings and construction set to begin on the paint shop, we are well on track to meet all our scheduled milestones." Other news regarding VW's new plant includes:

* The training center at the plant is scheduled to be completed in the fall quarter of this year.
* Over 100 full-time VW employees now work in Chattanooga and the company has moved into new office space   downtown.
* Equipment procurement for the paint shop has been issued.
* Meetings with potential suppliers have already begun.
* The plant will produce a new mid-size sedan for the U.S. market that reportedly will get up to 55 miles a gallon.

Production in Chattanooga is expected to begin in early 2011. VW is investing $1 billion in the project and expects to employ 2,000 direct jobs in the Chattanooga, Tenn. region.

Bridgestone-Firestone's Warren County, Tenn. Plant Earns First LEED Certification

Bridgestone-Firestone North American Tire's Warren County, Tenn. (McMinnville) plant has earned LEED (Leadership in Energy and Environmental Design) certification from the U.S. Green Building Council. The certification is the first for a tire plant in the world. BFNAT's Warren County tire plant has an impressive track record of environmental performance, including the use of clean energy hydrogen fuel cells in automated-guided vehicles in the plant. Energy-efficient lighting, high-tech fans and other resource-conserving equipment is also installed throughout the plant. In addition, the company has reduced water consumption at the facility by more than 8 million gallons a year.

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