Volkswagen May Build Small SUV at Factory in Tennessee

Volkswagen AG (VOW) plans to debut a subcompact sport-utility vehicle in the U.S. as soon as 2016 and may build it at its Tennessee factory.

“Chattanooga is in the lead” to build the small SUV, Marc Trahan, executive vice president of VW of America, told reporters following a speech to the Automotive Press Association in Detroit yesterday. “We’ve made a significant investment in Chattanooga and it’s one that we want to have its full potential realized.”

Volkswagen, based in Wolfsburg, Germany, is looking to increased deliveries in the U.S. to help it achieve its target of becoming the world’s largest automaker by 2018. U.S. sales of VW-brand vehicles, including the Passat sedan produced at the $1 billion Tennessee factory, fell 1.3 percent to 282,913 this year through August.

VW will decide where to build its small SUV by the end of the year and cost will be the determining factor, Trahan said. At this stage, the Chattanooga plant would beat a VW factory in Mexico, he said.

“For me, the answer is obvious, but we have to go through a pretty deliberative decision-making process,” Trahan said. “Additional product will go in” the Chattanooga plant. “It’s not a question of if. It’s a question of when and what.”

Trahan yesterday declined to discuss VW’s talks with the United Auto Workers union.

VW and the UAW met in Germany Aug. 30 to discuss establishing a German-style works council at the Chattanooga factory. The meeting in Wolfsburg focused on how the automaker might recognize the UAW as a representative of its Chattanooga workers and how to set up a works council comprised of union and management representatives.

To contact the reporter on this story: Keith Naughton in Southfield, Michigan at Knaughton3@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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