VW will build a version of its CrossBlue Concept when it completes the Chattanooga plant expansion.

Volkswagen continues to expand its operations in Tennessee, and with the German maker already set to double the size of its Chattanooga assembly plant it will also partner with supplier Gestamp to set up a new stamping plant near the assembly line.

The $180 million project will create another 500 jobs, improve basic logistics and allow the use of an advanced hot stamping process yielding ultra-high-strength steel panels that are lighter, more fuel-efficient and safer, according to Volkswagen.

“The importance of this expanded partnership for Volkswagen and Chattanooga cannot be overstated,” said Christian Koch, President and CEO of Volkswagen Chattanooga. “We have put another crucial pillar into place for our future success and the benefits of this expansion will impact the community for years to come,” Koch added during a news conference in Chattanooga.

Until now, VW has had to resort to using a number of different press shops spread across several states to provide body panels and other sheet metal parts for the Passat model produced in Tennessee. But with the factory set to roughly double in size to handle production of an all-new sport-utility vehicle, the economics of localizing stamping operations apparently fell into place.

Moving stamping operations closer to the plant has a number of advantages. It helps simplify the supply chain, reduce shipping costs and potentially improves quality. With the Gestamp facility nearby it is easier to address potential problems immediately reducing the chance that bad parts get into the system. With VW well below industry average in the latest J.D. Power Initial Quality Study, that could prove to be a big help.

(For more on the 2015 JD Power IQS, Click Here.)

VW's expansion of its Chattanooga, Tennessee plant will create about 2,000 new jobs on the line.

Meanwhile, the partnership allows Chattanooga to make use of hot stamping technology for the first time. Explains a Volkswagen news release, “This state-of-the-art process allows the metal to become lighter, but harder, contributing to the reduction of greenhouse gas emissions while improving the occupant’s safety inside the car.”

Ironically, the Chattanooga assembly plant is built on an old munitions site used by the U.S. during World War II. The facility has seen VW expand its footprint rapidly in the few years since the assembly plant opened in 2011.

(VW planning major reorganization. Click Hereto find out more.)

As part of the latest project, VW swapped 59 acres of land with the City of Chattanooga and Hamilton County for the adjacent space that will house the Gestamp facility.

When the latest moves are completed, VW will have the capacity to produce more than 400,000 vehicles annually in Chattanooga, including both the Passat and a production version of its Cross Blue Concept midsize SUV. That will create 2,000 new jobs on top of the current 2,400 at the assembly plant.

(Click Herefor a first look at the new Volkswagen GLI.)