Despite recession fears, German carmaker Volkswagen is sticking to its goal of overtaking Toyota as the world's largest carmaker. The company says it wants to spur growth in the American market by building a new plant in the United States. VW chief Martin Winterkorn said the company is expected to approve the investment before the summer holidays.
The United States market is considered the most important measuring stick for Volkswagen's competitiveness. But the company is far behind market leader Toyota in America -- the Japanese carmaker sold 2.6 million cars in 2007 compared to VW's relatively weak 230,000.
Nevertheless, the company would like to see all that change. A planned US factory is expected to better shield VW from the dollar's weak exchange rate against the euro. Winterkorn is expected to present his plan to VW Chairman Ferdinand Piech and company executives in mid-July. "Before the summer break in July, we will take the issue of a US plant to the board for a decision," Winterkorn told the German financial daily Handelsblatt. The VW chief executive said he hoped US-based production could start as early as 2010.
Company sources told the newspaper that VW executives had agreed in principle to open a US plant, but were still hoping to secure further financial concessions from the regions being considered for the factory. "Three eastern states are finalists," Winterkorn told the paper, which listed Alabama, Tennessee and Michigan as possible locations.
The head of VW's works council, which represents the interests of workers, told Handelsblatt that because of the dollar's weakness against the euro, the company had no choice in the medium term but to manufacture cars for the US market within the dollar zone. The company is expected to enter into talks with unions in the US in June. "We take a new plant site very seriously," Osterloh said. "If we want to surpass Toyota and continue our successful growth strategy, then we must also gain a greater share of the US market."
Company sources also told the newspaper that the new plant may become the first at which cars from Volkswagen and its major shareholder, Porsche, are produced in the same factory. In order to save money, the company is considering the production of models from VW, luxury subsidiary Audi and Porsche.
After the closure of its last plant in the US in 1998, VW's only production in the dollar zone has taken place at its Puebla, Mexico plant.
Analysts have questioned the timing and scope of VW's American ambitions. The market attack is coming in the face of the subprime crisis and fears of a recession that are driving down spending in the US. The world's largest market for cars is also shrinking and the industry is expecting its worst sales in 10 years for 2008. General Motors, Ford and Chrysler have had to introduce massive rebates in order to keep their factories buzzing with new orders.