Volkswagen Factory in Chattanooga Foundation for Future U.S. Strategy

Ceremony officially marks beginning of construction work

CHATTANOOGA, Tenn. and WOLFSBURG, Germany, May 14 -- The Governor of the State of Tennessee, Phil Bredesen, and Professor Dr. Jochem Heizmann, Member of the Board of Management of Volkswagen AG with responsibility for Group production, will be joined today, Thursday (2.00 p.m. local time), by invited guests to celebrate the placement of the first wall at the new U.S. factory in Chattanooga, Tennessee. The plant represents a major milestone for the Volkswagen Group in attaining its ambitious growth targets for the North American market.

Production in Chattanooga will begin in 2011 with a maximum annual capacity of 150,000 vehicles. Over the coming months, modern, environmentally-friendly buildings housing a body shop, paint shop, assembly and offices will be built on the site which covers approximately 1,580 acres.

"Our own car production 'made in America' is an important core element of our growth strategy on the U.S. market. That is why today is a major milestone for the Volkswagen Group. The automobile will always be an essential part of the American way of life. Despite the present situation on world markets, the U.S. market will recover and Volkswagen will be ready when that happens," said Prof. Dr. Heizmann. "Our new plant in Chattanooga sends a clear and strong message for Volkswagen, for the automotive industry and for the state of Tennessee. The United States is a great car nation and we believe in a promising future for Volkswagen here."

Volkswagen Group of America will invest $1 billion in the plant and employ 2,000 people. As a result of this investment, an independent study estimated the overall impact of the plant will generate an additional $12 billion in income growth and more than 9,500 indirect jobs over the life of the project.

The Chattanooga factory will build a new mid size sedan specially designed for the North American market. Approximately 30 percent of these cars will be powered by Volkswagen's TDI Clean Diesel Technology.

"The partnership between the state, the community and Volkswagen is creating an impact that is literally concrete," said Governor Bredesen. "The dramatic change we've seen on this site over the past year is clear evidence of Volkswagen's commitment to the people of Tennessee and to the future of the company."

"This is a big day in our company's history. Today, we are putting down new roots in the United States of America. And we are entering a long-term partnership with this community, this state and this country," said Frank Fischer, Chairman and CEO of Volkswagen Group of America Chattanooga Operations, LLC

"You can see our commitment take tangible form in this wall. But that commitment is far more than bricks and mortar. Building a plant and providing jobs doesn't make you a good corporate neighbor. You have to become part of the community. You have to respect and protect the environment. You have to help nurture the next generation. These are the things that Volkswagen is committed to here in Tennessee and throughout America," added Stefan Jacoby, President and CEO of Volkswagen Group of America.

"The American auto industry is wherever Americans -- and especially Tennesseans -- are building cars and trucks," said Senator Alexander (R-Tenn.), who, as Tennessee's governor in the 80s, helped bring the auto industry to Tennessee for the first time. "VW's new plant in Chattanooga means more jobs, and not just for the plant itself. VW's investment in the Chattanooga community will serve as a jobs magnet, bringing thousands more auto-related jobs to Tennessee."

Since the beginning of the project, nearly $272 million in local contracts have been awarded by the city, state and Volkswagen; this includes more than $204 million for Volkswagen contractors and subcontractors, with another $230 million over the next 20 years.

"With production on schedule, it appears Volkswagen may be timing the market just right. They're gaining market share and there will likely be pent-up demand when the recession comes to an end. I'm anxious for the day when the first cars roll off the assembly line in 2011," said U.S. Senator Bob Corker. "Through twists and turns, Chattanooga maintained focus, invested wisely and exercised tremendous effort and energy in recruiting a major employer to our community. Volkswagen has broken an economic barrier in Chattanooga, and today marks another milestone on a path that will take our community, our state, and our region to levels we can only begin to imagine today."

With the construction of the Chattanooga factory, Volkswagen is also assuming special responsibility for the environment. Apart from energy-saving ventilation systems which compensate for fluctuations in outside temperature, the production halls will also feature efficient industrial lighting systems with reflectors. Furthermore, Volkswagen is partnering with the state and city to distribute saplings for every tree displaced by the construction of the Volkswagen plant. As part of that commitment, today VWGoA Chattanooga Operations donated 20 saplings to the city of Chattanooga at the wall raising event.

Moreover, Volkswagen is making a commitment to the people in the region. At the end of March, Volkswagen already announced it would be participating in the "Partners in Education" program, contributing some $5.3 million over a five-year period. The partners are regional universities as well as vocational training institutions and local schools.

"The first wall of the production facility going up is another sign that Volkswagen is a part of our community and here for the long haul," said Congressman Zach Wamp. "It is exciting to see a next-generation and environmentally-friendly manufacturing plant being built in the heart of the Tennessee Valley Technology Corridor. At a time when unemployment is rising across the nation, it is encouraging to know this billion dollar investment will continue to create new jobs in our region."

In 2008, the Volkswagen Group produced 6.347 million vehicles worldwide, of which 66.2 percent (4.201 million vehicles) were built outside Germany. The Chattanooga factory will be the 62nd facility in the production network of the Group with its nine brands.

The goal of the Volkswagen Group is to triple sales in the U.S. by 2018 under its growth strategy. This strategy is based on the five pillars of product strategy, brand strategy, dealer network, organization and local production. The new strategic orientation coincided with the relocation of the Volkswagen Group of America headquarters to Herndon, Virginia, in early 2008. In spite of the market downturn, Volkswagen grew market share in the first four months of the year by 43 percent.