$900M Chattanooga Plant Upgrade Escapes Volkswagen's Axe

Volkswagen will still invest $900 million in its Chattanooga, Tennessee plant despite company-wide cost cutting from its diesel disaster, the automaker announced Thursday.

The company had long planned on a mid-size, three-row SUV to compete in the U.S.. However, those plans were upended when the Environmental Protection Agency announced in September that Volkswagen’s diesels had been illegally polluting, and the company shed billions from its value in following days.

The three-row SUV, which may follow closely Volkswagen’s CrossBlue Concept, was announced last year for the Tennessee plant. Volkswagen said it would begin building the SUV at the end of 2016.

This week, Volkswagen announced its plan for restructuring operations and emerging from the diesel scandal that’s cost the company billions so far in depleted stock value. In the third quarter, Volkswagen set aside more than $7 billion to pay for the 11 million affected cars worldwide, but many analysts say it’s likely that won’t be enough to cover the costs.

“The United States continues to be one of the most important markets for Volkswagen, and our commitment to Chattanooga and the state of Tennessee is clear proof of that,” Michael Horn, president and CEO, Volkswagen Group of America said in a statement. “The Chattanooga plant is a core part of our strategy in North America. Here and throughout the region, we will work toward meeting the demands of our U.S. customers and regaining their trust in the Volkswagen brand.”

The company said it would shed non-essential plans and models, and delay its restructuring of its operations in North America until it fixed its diesel cars.

According to a statement, Volkswagen announced it would create 2,000 jobs in addition to the plans for the SUV. In Tennessee alone, Volkswagen said it would spend $600 million in plant improvements.