VW Eliminates 500 Jobs in Tennessee

Volkswagen AG is cutting 500 contract jobs at its assembly plant in Chattanooga, Tenn., thus shrinking the factory's workforce to 2,700 employees by the end of June.

The company says it will need fewer workers because is reducing shifts at the facility in response to excess inventories of the VW Passat midsize sedan built there. The company had a 97-day U.S. supply of all VW brand vehicles on April 1, about 50% more than the ideal level, according to Automotive News.

Beginning in mid-May, the factory will operate on 10-hour shifts for four days per week instead of six days weekly, which will require only two of the three current teams of workers. VW plans to offer permanent jobs to about 30 contract workers and continue to employ 100 others on a temporary basis.

In early 2012, the company said it might add 800 employees to keep up with strong demand for the Passat. But as sales growth slowed late last year, VW realized its expectations were "too high," Frank Fischer, CEO of Volkswagen Chattanooga, tells the Chattanooga Times Free Press.

U.S. sales of the Passat surged to 117,000 units in 2012, the first year of full production in Chattanooga, compared with 22,800 in 2011. Passat demand grew 6% to 25,900 units in this year's January-March period.