Volkswagen is on the verge of a momentous occasion for its US operations: the grand opening of its Chattanooga, Tenn. assembly plant on May 24. The factory has been years in the making – and represents a crucial step in Volkswagen's plans for US growth.
With an estimated development cost of around $1 billion and annual production targeted at 150,000 units, the factory is hugely important for the German automaker. VW hopes to increase its US sales to 1 million vehicles annually by 2018, including 200,000 from its Audi luxury division – a lofty goal, considering that the two brands currently sell less than 500,000.
"You have to be successful in the US if you want to be number one in the industry," said Martin Winterkorn, Volkswagen's chief executive. "Trends are set in America, not just for consumer behavior but also for communication technology, computers, and software."
Volkswagen views US expansion as crucial to the long-term success of the brand – and with good reason. While VW has 11 percent of the global new car market, it only has three percent of the US market. VW needs a big hit to grab a bigger share – and up to bat is the all-new 2012 Passat, the first vehicle to be produced at the Chattanooga plant.
Longer, wider, and cheaper than previous generations, Volkswagen hopes the new Passat will no longer be viewed as a higher cost, niche alternative to the popular Toyota Camry and Honda Accord. Paired with the smaller Jetta sedan, which has also been redesigned for broader appeal, Volkswagen is aggressively targeting some of the US market's most competitive segments.
Of course, Volkswagen isn't the first foreign automaker to build a US factory. Honda, Toyota, Nissan, Hyundai, BMW, Mercedes and others have already established manufacturing footholds here. Volkswagen itself had a plant in Westmoreland, Pennsylvania, before a declining economy forced them to close it in the 1980s.
But perhaps no other automaker has pinned such big hopes on its US production facilities. And beginning this week, Volkswagen's big volume dreams will start rolling off the line.