Volkswagen CrossBlue Concept

We've reached a new step in the ongoing drama at Volkswagen's factory in Chattanooga, TN. The United Auto Workers recently dropped its opposition to the union vote and agreed that it wouldn't hold another ballot for at least a year. Now, the new question becomes where VW is going to build its forthcoming midsize SUV.

Earlier, it had been considered all but certain that the SUV, likely a production version of the CrossBlue concept (pictured above), would be built in Tennessee. However, it seems the Chattanooga factory might have competition to produce it. In emails obtained by The Detroit News, VW's lawyer wrote to the Tennessee economic development department in January saying, "While we understand there are some 'non-deal' issues that are causing a delay in the TN solution, VW has been successful in reaching agreement on terms at the alternative locations."

As previously reported, the state of Tennessee allegedly offered VW about $300 million in incentives to build the vehicle there and create an estimated 1,350 jobs, but it later rescinded the deal. Newly leaked documents from NewsChannel 5 (WTVF-TV) in Nashville allegedly show just how close that offer was to being completed. It appears that VW actually sent the government the first draft of a memorandum of understanding agreeing to the incentives, but the state removed the offer in late January.

Volkswagen boss Martin Winterkorn announced at the 2014 Detroit Auto Show that the midsize SUV was scheduled for its US launch in 2016, as a model designed specifically for North America. He also said the company would invest over $7 billion over the next five years. Time might be running out to find a production location. If not in Tennessee, the alternative would appear to be VW's assembly in Mexico.

Autoblog reached out to the Chattanooga factory and was given no comment. Scroll down to watch WTVF-TV's latest report on the newly leaked documents that it has.