In keeping with their goal to rival Toyota's global sales, Volkswagen AG will invest US$1 billion in a new factory to be built in Chattanooga, Tennessee.
When opened in 2011, the factory will employ 2,000 workers. Production will begin with a new mid-sized sedan designed specifically for North America. In addition to expanding production capacity, the new factory will help insulate the company against the adverse effects of a weakening US dollar and fluctuating exchange rates.
Last year, the VW/ Audi Group sold over 324,000 units, roughly 230,000 of which were Volkswagens. The company plans to increase it's US sales to 1 million units by 2018, with 80 percent of that volume coming from the Volkswagen brand.
"The U.S. market is an important part of our volume strategy, and we are now very resolutely accessing that market," said VW group CEO Martin Winterkorn. Winterkorn went on to note that Chattanooga was chosen because of its supplier infrastructure, qualified workforce and transport connections.
The news ends speculation that Volkswagen had planned to build the new factory in Alabama. Rumors also circulated that Michigan was an alternate candidate.
VW, Europe's largest carmaker, closed their last U.S. production facility, located near Pittsburgh, Pennsylvania in 1988.