Volkswagen Plans North America Onslaught

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Includes: F, HMC, TM, VLKAY
by: TheCarConnection

By Viknesh Vijayenthiran

The global economic crisis has taken its toll on virtually every major automaker around the globe but the effects have varied significantly between firms. General Motors' financial predicament has been well documented, with the ailing Detroit-based firm still recovering from. Toyota (NYSE:TM), too, has been hit hard by the crisis, with the usually unassailable automaker expecting its first loss this year after nearly seven decades of profit.

Volkswagen (OTCPK:VLKAY), on the other hand, posted a record net profit of $6 billion for the past year, and is still expecting to be profitable in 2009 despite analysts predicting the year to be one of the worst on record for the auto industry. But for the German auto giant to truly topple its rivals, it will have to conquer the lucrative North American market.

To do so, Volkswagen has an ambitious plan centered on a $4 billion investment plan to build an assembly plant in Chattanooga, Tennessee. The new plant will be used to manufacture at least two new models but, according to the automaker's U.S. chief, Stefan Jacoby, this is only the start of a full-on North American market onslaught.

In addition to a new mid-size sedan that Volkswagen has said it would produce locally from 2011 onwards (see photo), the automaker is mulling models for other segments, Jacoby said. Desperate to move out the realms of niche segments, Jacoby also confirmed that Volkswagen will also source a new compact sedan from Mexico.

Under discussion is a new entry-level model based around the 2011 Polo as well as a seven-seat SUV and an updated version of the iconic Beetle. The new SUV would compete with the likes of the Honda (NYSE:HMC) Pilot, Toyota Highlander and Chevrolet Traverse and would be significantly cheaper than the current Touareg.

Above the new midsize sedan, which is being designed to compete against the likes of the Toyota Camry and Honda Accord and will be available with both diesel and hybrid variants, Jacoby said Volkswagen has another product that could compete with the Toyota Avalon. Finally, to top out the range, Volkswagen plans to bring back an updated version of its Phaeton luxury sedan.

And instead of importing most of its models from Europe, where currency fluctuations have left the company losing billions in North America, its high-volume vehicles will be built in the U.S. or Mexico, with parts from nearby suppliers.

"We want to be the No. 1 automaker globally," Jacoby said during a recent briefing at Volkswagen's U.S. headquarters in Virginia. "Not everybody believes in this goal. We believe in this vision we have, and we are working very hard on its realization."

[Detroit Free Press]