Volkswagen has just announced that it is terminating 500 contracts at its assembly plant in Chattanooga, Tennessee, according to an Autonews report. The reasons quoted are overly-optimistic expectations when the plant was first opened and the fact that they were already running overcapacity, making 170,000 cars per year – 20,000 over the original plan.
The facility is the first operational VW factory on U.S. soil since 1988, and it makes the local version of the familiar Passat, which is unique to the North American market. It now runs two 10-hour shifts from Monday to Saturday, which employs three teams, and the plan is to cut back to using only two teams that will keep running the same shifts but only until Thursday of every week.
Sales of the Passat are not bad overall, while VW made record sales in March. The mid-size sedan sold 117,023 examples Stateside in 2012, an increase of over 22,000 units over 2011. In March 2013, however, VW delivered 9,521 Passat or 5.1 percent less than the same month last year. From the beginning of 2013 and through March, VW has sold 25,909 units, up 5.6 percent.
The layoffs are set to be completed by June 30, and the number of employees will drop from 3,200 to 2,700. Another reason for the decision may have been the fact that, as the plant has been running over time, the staff has gained experience, and the whole process is much more efficient, and this coupled with the overcapacity problem and you have probable cause.
By Andrei Nedelea
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