VW to Add S.U.V. Production to Chattanooga Plant

The assembly line in Volkswagen's plant in Chattanooga, Tenn. By AARON M. KESSLER July 14, 2014

Volkswagen announced Monday that it would build a sport utility vehicle at its Chattanooga, Tenn., plant, the site of a contentious unionization effort that led the United Automobile Workers last week to take the unusual step of forming a local that is not recognized by the automaker.

The factory, where the automaker produces only the Volkswagen Passat, had been competing for the new crossover S.U.V. against a VW plant in Mexico, and that fight became a crucial point in the bitter public battle over a unionization vote in February.

The production line, to be ready by 2016, will be accompanied by the creation of a research and development center. The company said it was investing roughly $600 million in Tennessee through 2016 as part of its new plans, and expected to add about 2,000 jobs.

At a news conference in Wolfsburg, Germany, on Monday, VW's chairman, Martin Winterkorn, called the increased production "a strong signal of the long-term commitment of Volkswagen to the region."

"This vehicle will be a true American car," he said, "big, attractive and with lots of high tech on board."

The company hopes the new midsize S.U.V. can help its goal of selling 800,000 vehicles a year in the United States by 2018.

"This vehicle will play a big role in our success here in America," said Christian Koch, head of VW's Chattanooga operations.

The stakes are also high for the U.A.W., which targeted the Chattanooga plant in its latest effort to organize a foreign automaker, and where it came closest to winning for the first time.

While VW did not contest the union's efforts and even publicly spoke of its desire to create a German-style works council made up of employees and management, the move provoked fierce criticism from Tennessee politicians who oppose organized labor.

With the competition between the Tennessee and Mexican factories fanning the flames, Tennessee politicians said that state incentives for the plant's expansion could be at risk if workers voted to unionize, drawing accusations from the U.A.W. of improper outside interference.

In February, workers at the Chattanooga plant narrowly voted 712 to 626 against joining the U.A.W.

Senator Bob Corker, a Tennessee Republican, was one of the most outspoken lawmakers against the unionization effort. At the time, he said VW officials had told him that the company would add the new S.U.V. production line if the workers rejected the union — a statement that provoked an outcry from the U.A.W.

On Monday, Mr. Corker and Gov. Bill Haslam of Tennessee, a Republican, were in Germany for the Volkswagen announcement. Both praised the factory workers in Chattanooga.

"I want to thank the wonderful workers," Mr. Corker said, adding that he believed "lives are being changed" as a result of VW's announcement.

Mr. Haslam also praised the factory employees, saying VW would not have made its decision if it "didn't have confidence in the quality of the workmanship" at the plant.

"It means a lot to us that Volkswagen would double down on their bet on Chattanooga," he said.

As part of Monday's agreement, Volkswagen will receive incentives of $166 million toward the plant's development and $12 million more for worker training.

The U.A.W., however, is not giving up in Chattanooga: last week, in an surprise move, it announced that it was forming a union local to represent workers that would have voluntary membership and no dues, and would not be formally recognized by the automaker.

Gary Casteel, the U.A.W.'s secretary-treasurer, said the union had reached a "consensus" with VW, whereby once the new local signed up "a meaningful portion" of the plant's work force, "we're confident the company will recognize Local 42 by dealing with it as a members' union that represents those employees who join the local."

Mr. Corker's office released a statement the next day disputing that, saying "The fact is, nothing happened. Any union can rent space in any city and open an office."

On Monday, Mr. Casteel said in a statement: "The fact that the new line is being announced four days after the rollout of U.A.W. Local 42 in Chattanooga reinforces the consensus that the U.A.W. has reached with the company."

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