Volkswagen AG (VOW)
, seeking to revive flagging U.S. sales, will add a mid-sized sport-utility vehicle in 2016 to its factory in Tennessee that’s been a battleground for labor seeking to organize at foreign-owned carmakers in the U.S. South.
Volkswagen, based in Wolfsburg, Germany, said today at a news conference that it would spend $900 million, including $600 million at VW’s factory in Chattanooga, Tennessee, to build the seven-seat model. The company, which ranks second to Toyota Motor Corp (7203) in global auto sales, is looking to the expansion to shore up its lineup in a growing segment.
The prospect expanding the factory, which now makes only Passat sedans, became a central element in the fight by the United Auto Workers to form a union there in February. Opponents said voting to unionize could jeopardize Volkswagen’s plans, a contention the UAW said was an effort to intimidate workers. Ultimately, workers in a close vote rejected the UAW push to unionize the factory.
Today’s announcement by the company came four days after the UAW said it opened a branch office at the plant as part of a plan to form a German-style worker council on the site.
The company plans to invest $7 billion in North America by 2018 to almost double the namesake brand’s annual U.S. sales to 800,000 vehicles and become more than a niche producer. A previous effort to broaden its appeal to U.S. drivers with a bigger, cheaper version of the Passat sedan has stalled.
Expand Capacity
VW chose the $1 billion Tennessee factory, its only U.S. production site, for the new SUV over its plant in Puebla, Mexico, after weighing local incentives. The Chattanooga plant can produce about 150,000 vehicles a year, and its capacity is being expanded 67 percent to 250,000 vehicles annually.
Casteel said last week that he was confident Volkswagen will recognize the newly formed Local 42 once the union demonstrates a “meaningful portion” of the workforce joins.
The union lost a Feb. 14 election supervised by the National Labor Relations Board by a vote of 712 to 626. The loss set back UAW efforts to organize workers at manufacturing plants in the U.S. South, which has long resisted labor unions, though the union is pushing forward with plans to form worker councils at other plants.
The councils can only operate as bargaining units where a union is in place.
-Bloomberg
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