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First Person: The Site Selection Process Behind VW's First U.S. Manufacturing Facility

In May 2011, Volkswagen officially opened its $1 billion U.S. manufacturing facility in Chattanooga, Tennessee, creating 2,000 jobs and projected to have an $18 billion economic impact on the region. To find out more about this historic foreign direct investment decision, Area Development's editor discussed the site selection process with the person at Volkswagen in Germany who was charged with leading the U.S. site selection team, Dr. Christof Spathelf.

November 2011
What led VW to establish a U.S. manufacturing facility, i.e., how did the decision fit into its overall strategy?

Spathelf: The Volkswagen Group has committed to a strategy that includes increasing sales worldwide to more than 10 million cars by 2018. Part of the strategy is to increase sales in the United States to more than one million Volkswagen and Audi cars by 2018.

Volkswagen decided to locate a production plant in the U.S. to establish close contact to the American customer base and to increase acceptance for its products as an American manufacturer that is investing in the economy while creating U.S. jobs. In addition, independence from currency fluctuations played a major role in the decision.

Specifically, how does the Chattanooga facility fit into VW's strategy?

Spathelf: The Chattanooga plant is a key factor in our U.S. expansion. The plant began production in Spring 2011, and will produce 150,000 vehicles annually when it is fully ramped up. The vehicle produced there - the all new 2012 Passat - is a new mid-size sedan made for the U.S. market and will play a large role in increasing sales in America.

I've read over 400 U.S. sites were considered. Why was Chattanooga, Tennessee, ultimately selected?

Spathelf: The process of site selection was very complex and, therefore, had to be systematic and transparent. We took 400 Metropolitan Statistical Areas (MSAs) into account. They were narrowed down by different principal criteria to 12 MSAs in seven states. Then the sites that matched our criteria in terms of size and basic infrastructure were researched in detail and analyzed.

What about labor requirements? How many people will the Chattanooga plant employ?

Spathelf: Volkswagen Chattanooga employs over 2,000 team members. We have the same high requirements for employee training and qualification as for our products.

I understand VW has set up its own training academy in Chattanooga. Can you tell us about that?

Spathelf: Volkswagen Academy is a unique, cutting-edge training center preparing employees for work at the Volkswagen plant, as well as advanced vocational and engineering programs. As part of his/her training, each employee gets introduced to Volkswagen's products, strategy, and structures during the first week of employment. In subsequent weeks, employees learn about efficient production processes based on the Volkswagen production system.

The Academy features modern classroom facilities with contemporary technology found in the finest university settings, and also features all the aspects of the manufacturing facility on a smaller scale to allow for hands-on training. The qualification track is designed to help workers prepare mentally and physically, so that when they enter the plant they are well prepared to acquire the competence in their field, whether it is the body shop, paint shop, or the assembly shop.

Is the company also partnering with particular colleges or universities?

Spathelf: Volkswagen Chattanooga, Tennessee Tech University, and Chattanooga State Community College have partnered to provide a seamless path through Chattanooga State and Tennessee Tech University for students to obtain a Bachelor of Science degree in Industrial Technology. With training from the Volkswagen Academy, students who hold an A.A.S. degree in engineering technology from Chattanooga State can seamlessly transfer to a bachelor's degree program from Tennessee Tech University.

How did the state and city meet VW's infrastructure requirements?

Spathelf: We had been offered an optimal lot, which ideally matched our requirements with respect to size, structure, and availability. We also appreciated very much the strong commitment and teamwork demonstrated by team members from the state of Tennessee and the local governments, the city of Chattanooga and Hamilton County; they were very active and supportive partners with us and demonstrated their strong interest and commitment in a non-bureaucratic way. Our requirements were handled with no outstanding issues.

Were financial incentives provided as well?

Spathelf: Volkswagen has received incentives in the form of the preparation of the site, tax breaks, various aspects of infrastructure as well as facilities, and support for the education of the work force.

Why was the Port of Savannah recently selected to handle auto parts being shipped to the Chattanooga plant?

Spathelf: The Port of Savannah offers an appropriate infrastructure, cost-effective handling, and the shortest distance of comparable ports to Chattanooga.

Tell us about VW's efforts to make the Chattanooga facility one of the greenest car manufacturing plants in the U.S.

Spathelf: With its product and production, Volkswagen is focusing on innovation and sustainable technologies to reduce the carbon footprint and to reduce waste and emissions. This plant complies with the highest standards of LEED (Leadership in Energy and Environmental Design). It was built to have minimal environmental impact. But we believe it will have an ongoing, positive impact on the economy of Chattanooga, the Tennessee Valley, and the United States as a whole.

Can you give us some specific details?

Spathelf: The walls are insulated with six inches of mineral wool. The roof is covered with a white membrane that reflects heat in summer, and we collect rainwater from the roof for use inside the plant and to cool welding guns. Our paint shop is state of the art, as it is the first to put into full use a system that produces no liquid paint sludge. Rather, it collects paint overspray with powdered limestone, which is then turned into concrete. This will reduce water use by 20,000 gallons a day. And we also save an entire heating process step in the paint shop with our "Process 2010," which reduces energy consumption and CO2 emissions by 20 percent. I could go on and on about the environmentally friendly aspects of this plant, but the bottom line is that it will use 35 percent less energy than a standard industrial building.

Were any challenges encountered during the location process?

Spathelf: One of the most important challenges during the decision-making process was the tight timeline to evaluate all the possible sites and harmonize the decision with internal and external stakeholders. The timeline was defined by the already fixed date for start of production of the then still unnamed new midsize sedan. This challenge was met through the excellent cooperation of the Volkswagen team with public and private partners in Chattanooga, including the Chamber of Commerce. The site selection for the plant was an integral part of the restructuring of all U.S. activities of the Volkswagen Group, including relocation of the sales headquarters to Washington. It was an extremely complex project.

Anything else you'd like to add?

Spathelf: The plant in Chattanooga is a huge investment and, as I said, the first step of Volkswagen's longtime strategy in the U.S. to reach our sales targets. At the same time, we want to contribute to establish energy-efficient and alternative powertrains in the United States.

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