U.S. Rabbit All Set to Hop

Volkswagen rolls into a Pennsylvania town

Until two years ago, the sleepy, small (pop. 3,000) Pennsylvania town of New Stanton near Pittsburgh was little more than a cluster of motels, restaurants and gas stations serving passers-by on the Pennsylvania Turnpike and Interstate 70. Now it has become a Rabbit farm. Next week Volkswagen Manufacturing Corp. of America, a subsidiary of the giant of German small cars, will begin turning out VW Rabbits in a refitted former Chrysler building on Route 119, just outside New Stanton.

It will not be the first time that a foreign maker has produced cars on U.S. soil. Britain's Rolls-Royce did it in Springfield, Mass., from 1921 to 1931. But Volkswagen's huge investment--a projected $250 million--makes it unique right now. No other overseas automaker has a U.S. factory operating; Volvo last year indefinitely postponed plans to build cars in the U.S.

The VW plant by late this year will crank out nearly 800 Rabbits a day (200,000 a year), employ 4,000 people, pay them $50 million annually and pump an additional $50 million into the local economy by stimulating employment in auto-related industries. Already, says Plant Manager Richard Cummins, VW is doing business with some 1,800 Pennsylvania firms. If all goes as planned, VW will be assembling its U.S. Rabbits mostly from U.S.-made parts by next year, with only engines and transmissions coming from Wolfsburg, West Germany. In economically depressed Lewistown, Pa., for example, C.H. Masland, a U.S. company, is building a plant to supply carpeting for Rabbits; it will employ 200 people.

The VW plant has produced a miniboom in New Stanton real estate. Eighty-four new apartment units have been built, with another 96 on the way. Some land in the surrounding countryside (mostly used for dairy farming) has sold recently for as much as $7,500 an acre, up 50% in five years. Two new banks have arrived in New Stanton to compete with the long established Mellon Bank branch. "And we got a dentist," adds Mayor John Reagan. "Something we never had before." Mail volume through the town post office has increased by 30% during the past year. Postmaster Henry Springer hopes that New Stanton Post Office will be elevated to first-class status, enabling it to hire more staff and lengthen hours of service.

Some residents fear that the plant will lure black workers from Pittsburgh to their largely white community and create racial tension. Reagan dismisses that objection as mindless. "We have a few colored families in town and plenty of apartments going up to take care of the others," says he. "They have as much right to work here as anyone else."

So far, VW has hired about 1,000 workers. Most live within 35 miles of New Stanton, but some with special skills have come from Ohio and New York. For management talent, VW turned to Wolfsburg and Detroit. To run the Volkswagen Manufacturing Corp. of America, VW raided General Motors and got lanky James McLernon. Despite seven years of service as Chevrolet's general manufacturing manager, he was passed over for a vice presidency and was ripe for plucking. He left GM with some misgivings: "It was a tough decision to make." But VW's lure was a reported $1 million, five-year contract, plus the chance to put the world's eighth largest automaker into U.S. manufacturing.

Before plunging into American assembly, VW did a great deal of thumbsucking. Its decision turned into a two-year touch-and-go process that had promoters for New Stanton and its chief rival for the plant, Brook Park, Ohio, hanging breathlessly by their seat belts. VW ultimately saw itself as having no choice but to assemble cars in the U.S. With the dollar losing value against the West German mark, VW's U.S. prices went up relentlessly. The average price of all Volkswagen models sold in the U.S. climbed almost 14% last year alone. VW, whose famous Beetle was once the top-selling U.S. import, saw its share of the U.S. market shrink from 6.8% in 1970 to about 2.5% now.

In its New Stanton plant, VW will be able to produce cars less expensively than it can in West Germany and perhaps meet its goal of grabbing 5% of U.S. car sales. The advantage of building cars in the U.S. was underscored by a new announcement last week: prices of VW's German-made autos were raised an average of yet another 3.9% in the U.S.

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