By Mike Pare
Chattanooga Times Free Press
CHATTANOOGA (CTFP) - Volkswagen's road to becoming the world's No. 1 automaker runs right through Chattanooga, where the cars built at its $1 billion assembly plant are expected to drive up demand for the brand in the United States.
The German automaker has high hopes of blowing past Toyota Motor Corp. and General Motors by tapping into the American market in a big way and by selling more cars in the emerging markets of China, Brazil, India and Russia.
"It's extremely ambitious," research analyst Aaron Bragman for Global Insight in Detroit said of VW's strategy. "Whether (VW) can pull it off is a matter of debate."
Already Europe's biggest car company by volume, VW wants to expand its dominance by boosting market share on other continents - in spite of the economic crisis that has gripped the United States and spilled across the globe.
VW, which this summer surpassed Ford Motor Co. as the world's No. 3 automaker, is well prepared for the future, said Stefan Jacoby, Volkswagen Group of America's chief executive.
"We have the right products in the market," he said.
One of those products will include a new midsize sedan aimed specifically at American motorists, company officials said. It will be made at the Enterprise South industrial park assembly plant, which is to start production by 2011 and employ 2,000 workers.
While VW is tight-lipped about the car to be produced in Chattanooga, Mr. Bragman said he imagines the vehicle will be a new version of its Passat sedan.
This week in Germany, the company is expected to reveal more details about the vehicle as Gov. Phil Bredesen leads a delegation of Tennessee government, community and business leaders on a trade mission to Germany. Delegation members are to meet with officials of Volkswagen AG and the automaker's supplier community.
VW wants to sell 1 million vehicles in the United States by 2018, including its Audi luxury brand. That's up from about 300,000 cars now. The automaker plans to introduce at least 10 new models in the United States by 2011.
The new cars VW introduces in the United States will have a "softer" suspension and ride than current models, and they will have a high-level interior quality, Mr. Bragman said.
"It's going to start pumping out products that look like Toyota in terms of appeal," Mr. Bragman said.
However, a stagnant car market in the United States could thwart VW's plans. Every sale VW makes will have to be taken away from another automaker, he said.
VW's Chattanooga plant is important not only in terms of overall company sales volume, but also is key for VW to become a profitable car company in the United States, a goal the company hasn't met consistently.
Mr. Bragman said the falling value of the dollar versus the euro makes it difficult for VW to import cars and sell them here at a profit.
"If it's made here, it's priced locally," the analyst said.
VW's plan in the emerging markets around the globe appears more sound, Mr. Bragman said.
"In emerging markets, a lot of people don't have cars," he said. "There is a new opportunity to grow the entire market."
Hans Dieter Potsch, a member of VW's global management board, reported this month that deliveries to customers in South America and South Africa were up 11.5 percent this year through August over a year ago.
In Asia and the Pacific, deliveries were even higher in the period, up 14.8 percent, according to Mr. Potsch.
In booming China, VW has seven plants and a market share of 17.8 percent, according to the company. In Brazil, where VW has five plants, it has a nearly 25 percent piece of the auto market, the company reported.
Mr. Bragman said the world's financial crisis is a hindrance to VW achieving its goals in the short-term. When it comes to auto sales, it's often a boom or bust business, he noted.
But, he said, now is the right time for VW to be building an American plant. When the economy turns around and sales improve, the automaker will be ready.
"It's not bad timing," Mr. Bragman said.
Channel 3 Eyewitness News and the Chattanooga Times Free Press have formed a partnership to cover the Volkswagen story from Wolfsburg, Germany. Channel 3's Greg Glover and the CTFP's Mike Pare will be workin together to bring you complete coverage in print, online, and on air this week.
Read more coverage from our partners at the CTFP here.