By Zachary A. Goldfarb
Washington Post Staff Writer
Thursday, September 6, 2007
Volkswagen of America plans to announce today that it will move its headquarters to Herndon, as part of a new corporate strategy to for revamping its sagging auto business.
The company said it would bring 400 jobs to the region and invest more than $100 million to set up operations in a new office building in Woodland Park near Washington Dulles International Airport.
The move is part of a corporate restructuring that would eliminate 400 positions, leaving 600 employees and contractors in Auburn Hills, Mich., outside 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 attractive.
"Fora 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 in 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," General Motors, Ford and Chrysler.
Gov. Timothy M. Kaine (D) authorized incentives worth $6 million to lure Volkswagen, including a $1.5 million cash payment in the next year and $4.5 million over five years beginning in 2011. The company won't receive the grants until it meets benchmarks for employment 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.
Kaine raised the possibility that the move would make it more likely that the company would choose to expand in the state if its fortunes improve. Volkswagen does not have an assembly plant in the United States but has discussed building one. 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, Lamborghini and Bentley cars, is part of the Volkswagen Group, based in Wolfsburg, Germany. The 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 United States, where customers flocked to its Beetle and Rabbit brands in the 1960s and 1970s. But in recent years, it has struggled. Since 2000, its share of the market for passenger cars in the United States has fallen substantially and is now less than 2 percent.
"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 models in certain categories -- for example, small sport-utility vehicles with an environmental slant, or passenger cars to compete with the Toyota Corolla or Honda Accord.
Jacoby also said the company 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 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 that 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 as many as 4,600 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 its manufacturing base declines. 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 185,000-square-foot headquarters. Employees are to begin occupying the headquarters in April, and the move should be completed by the end of 2008.