VWA: Labor Issues Not Holding Back Decision on CUV for Chattanooga

ROCHESTER HILLS, MI – The delay in green-lighting a new 7-seat cross/utility vehicle for production at Volkswagen’s Chattanooga, TN, plant is a result of German management’s close scrutiny of the business case for the plan, not because of potential unionization, a top U.S. executive says.

The new CUV, about the size of a Ford Explorer, was unveiled in concept form as the CrossBlue at the Detroit auto show in January, and insiders since then have made it clear Chattanooga is the front-runner to land the program.

VW’s giant complex in Puebla, Mexico, the biggest vehicle-assembly plant in North America, also is considered a candidate, as is the new Audi facility under construction in San Jose Chiapa, Mexico. But Chattanooga, with its available capacity and room for additional expansion, would appear to be the more logical choice.

The CrossBlue is targeted for production at the Tennessee plant beginning in April 2016 according to WardsAuto/Automotive Compass forecast data, with output topping 40,000 units that year and 55,000 annually thereafter.

VW has been promising a decision on whether it would OK the program for months, and now says it expects to announce its plans by the end of this year.

Recent controversy over whether the United Auto Workers union will represent the workforce at Chattanooga is believed to have thrown a new wrinkle into the decision-making over sourcing of the CrossBlue.

VW has confirmed it has had discussions with the union, and officials say they want to find a way to give its Chattanooga employees greater voice through its works council in Germany, but the auto maker hasn’t publicly taken a stand on whether that will mean union representation.

Marc Trahan, vice president-quality at Volkswagen of America, contends the potential for UAW involvement at Chattanooga isn’t slowing down the decision-making at VW headquarters in Wolfsburg, Germany.

“It has nothing to do with this talk about unions at Chattanooga,” he tells WardsAuto in an interview here. “It’s a basic financial calculation. This is sometimes where I think…we’re being too methodical.

“We set a target in terms of the financial return on each car coming off the line. And we’re still not quite there yet. We’re so close, I don’t see why we haven’t made a decision yet, but…that’s where we’re at. We’re on our way to getting it resolved.”

Building an Explorer-size CUV in North America would seem a must for VW, if it is to reach its ultimate sales target of 800,000 vehicles annually in the U.S. by 2018. CUVs are the fastest-growing segment in the market, and the brand lacks a popularly priced model. It also lacks a vehicle with 3-row seating capacity, now that it is phasing out its Chrysler-supplied Routan minivan.

A midsize CUV is “the most immediate” need to fill in VW’s U.S. lineup, Trahan tells the Automotive Press Assn. earlier this week. “The biggest potential we would see is this (CUV) market.”

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