Volkswagen chose Chattanooga over sites in Alabama and Michigan for the expansion project. It will be the Germany-based automaker’s first U.S. production facility since it shuttered a plant in New Stanton, Pa., near Pittsburgh, two decades ago.

“I couldn’t be more pleased that the spirit of partnership between the state of Tennessee, Volkswagen, and the government and business leadership of Chattanooga and Hamilton County has resulted in this significant investment,” said Matt Kisber, commissioner of the Tennessee Department of Economic and Community Development. “Volkswagen’s investment in this community means the hard work and dedication demonstrated by people at the state and local level to create one of the best business climates in the country is paying off.”

The automaker chose Chattanooga because it outperformed the other potential sites in terms of providing an existing infrastructure of components suppliers, a qualified work force, and of the availability of around 550 hectares of developed property with direct transport connections.

“We reviewed three excellent sites, all of which had the specific qualities necessary to build a plant in the United States,” said Stefan Jacoby, president and CEO of Volkswagen Group of America, based in Herndon, Va., who praised both the states of Michigan and Alabama.

“The U.S. market is an important part of our volume strategy and we are now very resolutely accessing that market,” said Martin Winterkorn, CEO of Volkswagen AG. “Volkswagen will be extremely active there. This plant represents a milestone in Volkswagen’s growth strategy. This new site will play a key role.

“This, along with our growth strategy, is a prerequisite for the economic success of the company in the dollar region,” he added. “We look forward to establishing an important mainstay for ourselves when we become the biggest European carmaker there.”

The company will build the facility in the Enterprise South Industrial Park, located 12 miles northeast of downtown Chattanooga. The 1,350-acre site is 100 percent owned by the city of Chattanooga and Hamilton County and is certified as an industrial megasite by the Tennessee Valley Authority. Enterprise South is adjacent to Interstate 75.

Initial production capacity for the facility is anticipated to be 150,000 vehicles, including a new mid-sized sedan designed specifically for the North American market. Production is scheduled to begin in early 2011. A cutting-edge modular production system at the plant will enable maximum flexibility, according to the company.

Volkswagen of America received an attractive, comprehensive package of incentives for the new facility from the state of Tennessee. The statutory incentives are tied to job creation and capital investment.

Additional support includes assistance for public infrastructure and job training, each designed to ensure the local economy best leverages Volkswagen’s investment to benefit the work force and ensure the facility’s success.

Tennessee officials recently approved $1.25 million for work at the Chattanooga site that was once part of an Army ammunition plant complex.

“We started with a vision of transforming an idle Army facility into the source of thousands of family-wage jobs,” said Hamilton County Mayor Claude Ramsey. “During the past 14 years, I’ve worked with four different city mayors, as well as county commissioners, city councilmen and countless others in overcoming barriers and objections to that plan. Today, we stand with our new friends from Volkswagen to make a historic announcement that will create new opportunities for our community for years to come.”

Jacoby said the region has a deep base of well-trained labor, with excellent engineering and manufacturing programs at the universities and technical colleges.

“Thanks to the visionary leaders and people of Chattanooga, we’re confident that the values of this area are compatible with our own, and we envision a long and productive partnership,” he pointed out.

With the new plant, Volkswagen will bring about 2,000 direct jobs to the area, and it will add a significant number of jobs in related sectors. It is expected that these jobs will come from Tennessee and nearby Georgia and Alabama.

“[The Knoxville metro] has the skilled workers and location that will welcome new employers and new jobs to the region,” said Mike Edwards, president and CEO of the Knoxville Chamber of Commerce. “Now we have to ensure that we have the land available for these new suppliers. Having business and industrial parks are important, and are necessary to have in place when a major announcement like the VW plant comes about. The industrial parks that the Development Corporation of Knox County manages will all be prime locations for these new auto parts manufacturers.”

The Chattanooga plant, in addition to factories in India and Russia, is part of Volkswagen's strategy to become the world’s No. 2 automaker. Volkswagen is aiming to sell 800,000 vehicles in the United States by 2018.

Volkswagen is the latest in a string of Europe- and Asia-based automakers to site assembly plants in the southern United States.

The South offers ample highway and rail connections and hundreds of existing suppliers, but its main attraction is a pool of workers who have shown at other European and Asian assembly plants that they can live without the United Auto Workers.

Industry executives and analysts have said there is plenty of room for more automakers in the region, as long as the plants are at least 40 or 50 miles apart to avoid competing for skilled workers.

Foreign auto assembly plants closest to Chattanooga are Honda in Lincoln, Ala.; the plant Kia Motors Corp. is building at West Point, Ga.; and Nissan at Smyrna, Tenn. all about 100 miles away.

In addition, Toyota, BMW, Hyundai and Mercedes-Benz all have production facilities in the South.

For MORE NEWS BRIEFS, click here.