Two European Automakers Plan to Assemble Vehicles in the U.S. for First Time in Decades

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Researched by Industrial Info Resources (Sugar Land, Texas)--Due to the recession and sluggish automotive sales, the majority of the automakers who assemble vehicles in the United States have focused on reducing production, cutting costs and closing unnecessary plants. However, two European automakers that have not operated a plant in the U.S. for quite some time have different plans. For the first time since the 1980s, Fiat SpA (OTC:FIATY) (Torino, Italy) and Volkswagen Group of America (Herndon, Virginia), a subsidiary of Volkswagen AG (OTC:VLKAY) (Wolfsburg, Germany), will be assembling vehicles on American soil.

Volkswagen, which has not assembled vehicles in the U.S. since 1988, is well under way with construction on a $1 billion grassroot plant in Chattanooga, Tennessee. The plant, when operational in 2011, will assemble 150,000 vehicles each year for sale in the U.S. Volkswagen has developed an aggressive plan to turn their U.S. sales around and increase them to 800,000 units per year by 2018. The plant will assemble a new VW midsized sedan for the U.S. market, as well as established models. Located on a 1,300-acre site, the 1.3 million-square-foot plant will have room to grow and support the automakers ambitious sales plans.

Fiat's plans for the U.S. have been more widely publicized. Fiat is the majority owner of the Chrysler Group LLC (Auburn Hills, Michigan), now that the American automaker has exited bankruptcy proceedings and is planning to reintroduce models to the U.S. using Chrysler plants. Fiat has yet to announce exactly which Chrysler plant will be producing Fiat models, and there is a possibility that another plant will be required to meet the engine and transmission requirements of the assembly plant.

Fiat has not been a player in the U.S. market since the 1980s. Fiat sold well in the 1970s, but quality issues and the oil embargo of the late 1970s put an end to Fiat's U.S. operations. Volkswagen suffered from similar quality problems in the 1980s, which led to the closing of the companys single U.S. plant in 1988.

Both automakers are hoping they can take advantage of a market that is filled with other automakers that have significant problems. Two of the three big U.S. automakers recently emerged from bankruptcy proceedings and are in the process of rebuilding themselves while the third is stepping very carefully, hoping to stay out of the same traps that snagged its brothers. The largest of the Japanese automakers is having profitability problems and has ceased all expansion amid the troubled economy.

This leaves the U.S. ripe for a pair of companies that are looking for new horizons. Both Fiat and Volkswagen are strong European companies that have managed to avoid the majority of problems facing most automakers in recent months. The American market is a massive moneymaker for all automakers, and both companies have decided that now is the time to grasp their pieces of the pie.

The timing could not have been better for Fiat and Volkswagen. All they have to do is live up to their own expectations, but that is easier said than done. While the timing may be good, it is still going to be difficult to break into the tough U.S. marketplace, especially on the tail end of a recession. But both Fiat and Volkswagen produce a lineup of smaller, more fuel-efficient vehicles that just might catch the eye of the vehicle-buying buying in the coming months. Look out traditional American automakers--the European invasion has begun once again.

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