Chattanooga: VW\'s Next Stand

Chattanooga, Tenn. â€" Honda wasn't the primary foreign automaker to open an assembly plant within the U.S., however it was the primary to remain.

In 1978, German automaker Volkswagen converted an unfinished Chrysler plant in Westmoreland County, Pa., to construct the Rabbit, but just like the lost Roanoke outpost in pre-Colonial Virginia, the plant failed.

With a brand-new plant now open in Chattanooga and producing greater than 600 Passats an afternoon, Volkswagen officials say they've learned from the painful lessons of Westmoreland. They've used that knowledge to construct a plant they think could be a force in U.S. automotive manufacturing for years yet to come.

As Honda and other automaker plants have cropped up across the U.S., "we checked out our own experience [at Westmoreland] and we checked out others' experiences, after which, you realize, once you examine the complexity of the project, we found our own way," said Frank Fisher, CEO of VW's Chattanooga operations.

To be a hit in Chattanooga, VW looked to its four pillars: product, plant design, parts and other people.

"For every of those pillars," Fisher said, "we developed our own approach, taking from what we have now experienced at Westmoreland, what other companies have done, and what we felt from our perspective we must always do."

While what happened to the Roanoke colony remains a mystery, what happened at Westmoreland just isn't: All four of VW's pillars collapsed:

• The product was flawed. The Rabbit had quality issues and "we Americanized the vehicle in a sense that our customers didn't love it in any respect," Fisher said.
• The plant wasn't planned by VW. In preference to being built from scratch to do what VW needed it to do, it was an unused Chrysler plant with a structure already in place.
• The folks were outsourced. VW hired an ex-GM official, and "VW's leadership perception at the moment was, 'they understand how to construct cars, so that they 'll be capable to launch a factory and build cars here,' " Fisher said. "There has been some antagonism between the production guys, perhaps even the R&D guys, at headquarters and within the plant here. They didn't work o.k. together."
• Ultimately, parts blew up the project. "The overall burden came when the dollar got pretty weak," Fisher said, "and the extent of parts that needed to be imported was much, much higher than in our (Chattanooga) project. This was why our project had a really strong focus in localizing parts."

The German automaker was resolute to not make the similar mistakes with its Chattanooga plant. When VW returned to the U.S., it was going to do things differently.

Meanwhile in 2008, officials for Chattanooga and Hamilton County, Tenn., were desirous to find an automaker to take over a producing site.

While Chattanooga, a "Rust Belt city of the South," had seen improvements since its industrial heyday, more work had to be done.

"We've spent during the last 40 years lots building ourselves out of the deep pit that we were in when Walter Cronkite told the realm that we were the dirtiest city in American 40 years ago, said Chattanooga Mayor Ron Littlefield.

"From a top quality of life sense, we feel like we've done a fantastic job of creating town back, however the thing it was lacking was a producing heart."

But the town and county had an ace up their sleeves for a heart transplant: a major site with significant transportation access and many open land. Railroad tracks run nearby; the airport is solely a quick distance away, and Interstate 75 â€" "some of the Main Streets of America" as Littlefield called it â€" isn't faraway from the positioning. Within the mid-2000s, Toyota came calling, needing a house for a brand new assembly plant.

"If ever there has been a classic site for heavy industrial investment, that was the location, and in order that's what we had pitched to Toyota," Littlefield said. "We were a touch crestfallen for having missed that one, however turned out to be the ideal for us."

In 2006, town's last major foundries had closed, idling hundreds of workers, "and so people thought that was the top of heavy industry in Chattanooga," he said. To make matters worse, Toyota opted to select a website in Mississippi instead.

It wasn't only manufacturing that dried up in Chattanooga. As inside the remainder of the rustic, construction was down. "Before VW showed up, I spent the last 25 years within the building industry on this area, and it got pretty bad," said Dale Cross, a team leader at Volkswagen's Chattanooga plant. "Housing development ceased to exist, almost. a lot of persons were seeking work, and that i was one in all them.

"So far as Chattanooga at the moment goes, we were losing industry rather then gaining anything," Cross said.

So, city and county officials approached Volkswagen on the 2008 North American International Auto Show in Detroit. That ignited a "fast and furious process," Littlefield said. By the center of 2008, the verdict to construct there has been made, and "as they are saying, remainder is history," he said.

For Volkswagen, getting the pillars right this time â€" building an enduring presence â€" was critical. When it came to product, plans for the recent U.S. version of the Passat were already under way before the plant was started. While launching any new car is usually a tough proposition, VW have been happily surprised by the positive response the Passat has drawn.

"i believe, frankly, the success we're having now nobody really expected," Fisher said. That success incorporates a choice of awards from across the auto industry, including Cars.com's Better of 2012 award and MotorTrend's Car of the Year.

The plant was designed to make employees more efficient and the plant itself greener. The fundamentals:

• VW has made a $1 billion investment into the plant.
• The plant sits on 1,400 acres northeast of downtown Chattanooga.
• Roughly 2,200 jobs were created when the plant opened, and another 800 jobs are being added.
• Because it sits now, the plant has a capacity for 150,000 Passats a year, however the site's footprint might be doubled, making an allowance for more production if demand demands it.
• It's a plant of "short distances," meaning all of the manufacturing areas come together in a smaller area, making communication better and more frequent.
• There's a focal point on quality assurance, with portions of the plant dedicated to testing so continual improvements may be made. To boot, VW gets feedback from consumers and dealers and works quickly to spot and attach problems.
• There are lots of aspects to the plant that make it environmentally friendly; these efforts won the plant the Leadership in Energy and Environmental Design Platinum certification in December 2011. It's the only auto manufacturing plant on earth to win that designation, VW says.

In terms of individuals, VW desired to accomplish a few things. First, it desired to continue good will with the community by focusing its hiring on Chattanooga and Hamilton County. Officials saw an oversized, well-educated workforce here. Second, company officials desired to be sure that employees were trained within the Volkswagen way, which didn't happen in Westmoreland. Employees spend weeks inside the VW Academy before they step onto the plant floor.

It wasn't easy to get a role, though: 85,000 people applied for the two,500 initial jobs.

"I didn't even really think I had a possibility," said Curtis Wilson, a team leader on the plant. He had no automotive manufacturing background. "i believed it was going to be plenty of people coming down from the North coming down here to work."

It was a touch "like winning the lottery," Cross added.

As for parts, VW has organize some suppliers at the factory's grounds. 600 individuals are employed by those suppliers and a miles higher percentage of parts come from the U.S., so Volkswagen is less at risk of currency swings.

VW is taking an optimistic, but wary, stance on its future in Chattanooga, Fisher said.

"We wish to go one decision before a better," he said, "but given the success to date, i might really expect a second model inside the near future."

The Westmoreland experience clearly has VW taking its time to be able to get this right. "The worst thing you are able to do on your life is to be arrogant and ignore facts," Fisher said. "As our CEO says: Please always stay at the ground."

Mayor Littlefield says he thinks VW is on target. "Unless the full world stumbles again, we expect that things are really going about in addition to lets have hoped for.

"What VW has done is installed a brand new heart, a brand new economic heart."

This story is a part of a joint series about automotive manufacturing within the U.S. by Cars.com and USA Today.

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