A European automotive supplier will invest another $180 million and add 510 jobs to supply parts for Volkswagen's new SUV.
"This fulfills a vision we have that Chattanooga would be a major manufacturer and supplier hub," Tennessee Gov. Bill Haslam said Tuesday, as officials announced that Spanish company Gestamp will triple its Chattanooga operations. "You're starting to see the blocks of that come together."
Over the next 24 months, Gestamp plans to hire about 510 more workers in addition to the nearly 300 who already work for the company in Chattanooga. It's the biggest single investment ever by a VW supplier in Hamilton County.
Gestamp, which started operating at Enterprise South industrial park in 2009, makes stamped parts and welded assemblies for the Passat sedan. The new plant will press body sheet metal and chassis components for the sport utility vehicle VW will produce late next year.
"This is one of those big days," Haslam said. "They could choose to invest anywhere."
Gestamp Chief Executive Francisco Riberas, whose company has 95 plants in 20 countries, said the supplier was a pioneer when it joined VW in Chattanooga, but the SUV prompted it to move ahead with the expansion that will triple its footprint in the city.
"Chattanooga is now a key component in Gestamp's strategic growth map in North America," he said.
Jeffrey Wilson, who heads Gestamp's North America division, said the existing Chattanooga facility pays average annual wages of $38,200. The new jobs will average that figure as well, he said.
U.S. Sen. Bob Corker recalled when he put in a phone call to Riberas last February to pitch Chattanooga. Corker, the Senate Foreign Relations Committee chairman, said he was on a trip to Iraq when they talked.
"The first call was a little more than choppy," the former Chattanooga mayor said, adding the Gestamp CEO talks with an accent as does he. "It was at a time when the call needed to be made."
Gestamp will start expanding its existing Hickory Valley Road factory this summer. Also, it will build its new 180,000-square-foot factory on 60 acres next to VW's existing supplier park adjacent to the production plant.
Christian Koch, who heads VW's Chattanooga operations, said the automaker is giving up the property for the Gestamp plant and talking with city and county officials about swapping for land of similar value.
"It will help the companies work closer," he said about the project. "It will cut transportation costs for stamped parts."
The City Council will vote next week on items related to Gestamp incentives.
The proposed 10-year payment in lieu of taxes agreement calls for Gestamp paying no taxes in year one, 25 percent in year 2, 40 percent in year 3, and 50 percent in years 4 through 10. School taxes would be paid the entire time.
Councilman Chris Anderson on Tuesday at a committee meeting questioned if there is a need for the incentive.
"It appears this may be happening anyway, so the question I have is: If it's going to happen anyway, why do the PILOT?"
Corey Jahn, the local operations manager for Gestamp, said the council should consider the new tax incentive because the company exceeded all of its benchmarks for a tax break it got in 2011.
Charles Wood, the Chattanooga Area Chamber of Commerce's vice president for economic development, cautioned council members that without the PILOT, the company could go elsewhere.
"This will be Gestamp's largest U.S. plant," Wood said.
Councilman Moses Freeman said Gestamp is the type of company the city wanted when Enterprise South was developed to revive "a dying industrial town."
Haslam said the state is putting together an incentives package for Gestamp, though it's not finalized. He said Koch "took it upon himself" to make the Gestamp deal happen.
"That fact that Volkswagen is an active player really did make this happen," the governor said.
Bill Kilbride, the Chamber's CEO, said that attracting suppliers such as Gestamp is "transformative" to Southeast Tennessee.
He said the investments and jobs support other businesses and people "where they live, shop and go to school."
Wood said the new plant will introduce a process for the first time in the South called hot-stamping technology. The technique allows metal to become lighter, but harder, he said.
Randy Boyd, state commissioner of economic and community development, said the most important factor for Gestamp's new facilities to succeed is the state's "talent pipeline." Boyd cited the new Tennessee Promise effort, which offers students two tuition-free years of community college, and Tennessee Reconnect, aimed at helping adults enter higher education so they gain new skills.
County Mayor Jim Coppinger said Gestamp is a global company and there are always other choices where it can invest. "We understand how committed you are to the area," he said.
Gerald McCormick, state House majority leader, said the Gestamp project is big for his district in which the VW plant sits. "It builds on the momentum," he said.
VW is investing $900 million to expand its assembly plant with plans to add 2,000 more workers to the 2,400 already at the factory. VW's new SUV is seen critical to the German automaker's effort to restart growth in North America.
Koch called the SUV "a great-looking car." He said VW is continuing to refine the design of the SUV, which has a working name of the CrossBlue. Riberas asked Tuesday what the SUV finally will be called.
Haslam quipped that "He'd like to know what he's going to stamp on there."