Volkswagen Moves Headquarters To Herndon
Volkswagen of America plans to announce Thursday that it will move its headquarters to Herndon, as part of a new corporate strategy for revamping its sagging auto business.
The company said it would bring 400 jobs to the region and invest more than $100 million in setting up operations in a new office complex in Woodland Park near Washington Dulles International Airport. The move is part of a corporate restructuring that would eliminate 400 positions, leaving 600 full-time workers and contractors in Auburn Hills, outside of Detroit.
Volkswagen of America's new president and chief executive, Stefan Jacoby, said in an interview yesterday that Northern Virginia's high-quality schools, skilled workforce and proximity to the airport made it an attractive locale.
"For a young talent, 35 years old, to come here with his family..... is a very important factor," Jacoby said. "By reducing this organization by 30 percent, you need even more talents, more creative people, more motivated people."
Jacoby added that the company decided as of early 2006 that it wanted to move to the East Coast, where most of its customers are. "You want to work in an environment where you see your customers, where you see your cars on the road," he said. "You don't want to work where you basically see only American cars of the Big Three."
Gov. Timothy M. Kaine (D) authorized incentives worth $6 million to lure Volkswagen here, including a $1.5 million cash payment in the next year and $4.5 million over five years, starting in 2011. The company won't receive the grants until it meets benchmarks for bringing jobs and investing in the region. Fairfax County will spend at least $1.5 million to accelerate road and land projects to ease Volkswagen's move.
In an interview, Kaine raised the possibility that the move would make it more likely the company would choose to expand in the state if its fortunes improve. Its last U.S. plant, in Pennsylvania, closed in the late 1980s.
"We're also mindful of the fact that Volkswagen, as they succeed, they may want to put another presence in North America and if they have a strong anchor in Northern Virginia that could lead to further activity," Kaine said.
Volkswagen, which makes Volkswagen, Audi and Bentley cars, is part of the Volkswagen Group, based in Wolfsburg, Germany. The global company had $138 billion in sales in 2006 and is the world's fourth-largest producer of passenger cars.
Volkswagen has a strong history in the U.S., as customers flocked to its Beetle and Rabbit hatchbacks brands in the 1960s and 1970s. But in recent years, the automaker has struggled. Since 2000, its share of the overall market for passenger cars in the United States has fallen substantially and now makes up just under 2 percent of all sales.
"Lately we are not progressing with our growth strategy as we wish to do so in the American market," Jacoby said. "This is the single biggest market worldwide."
As it seeks to reverse the declines, Jacoby said, Volkswagen will focus on rolling out models certain categories -- small SUVs with an environmental slant, for instance, or passenger cars similar to the Toyota Corolla or Honda Accord. "We must find the right mix between being distinctive German, Volkswagen, European and hitting the hearts of American customers."
But he added that the company also needs to decentralize and slash bureaucracy -- one goal of the job cuts. About 150 people in Detroit are expected to move to Herndon, including much of the corporate leadership. The rest will include those serving in marketing, sales and other white collar jobs.
A consultant retained by Volkswagen contacted state economic officials in February to discuss moving here as it considered 14 cities. From there, the process moved rapidly, with little personal involvement by the governor. In early August, Virginia learned its bid to host Volkswagen was successful.
"I really thought with VW the reason we won was our numbers spoke for themselves: high median income, low unemployment, very connected to the global marketplace," Kaine said.
The investment by Volkswagen would be the largest in Fairfax since November 2004 when Booz Allen Hamilton announced it would create up to 4,600 more jobs in the county with a $133 million investment over five years.
The news is a setback for Michigan Gov. Jennifer Granholm (D), who has been struggling to keep her state's economy afloat as the nation's manufacturing base suffers. Jacoby flew to Detroit last night to meet with Granholm. She has vowed to keep auto jobs in Michigan.
Kaine, Jacoby and Gerald L. Gordon, president and chief executive of the Fairfax Economic Development Authority, are to attend a ceremony this morning at the new, 185,000-square-foot headquarters, where construction workers yesterday were tending to the grounds and caring for the newly-planted trees. Employees are to begin occupying the facility in April and the move should be completed by the end of 2008.
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