Erich Merkle

Volkswagen AG with its planned Chattanooga assembly plant is taking full aim at Toyota Motor Corp.

“We have Toyota globally in our sights,” Volkswagen spokesman Tom Wegehaupt said from the company’s North American headquarters in Herndon, Va

The German automaker is trying to increase sales in the key North American market with its Chattanooga plant, in addition to building factories in India and Russia, as part of the company’s strategy to become the world’s No. 2 automaker.

In the first half of 2008, VW surpassed Ford Motor Co. in vehicle sales for the first time to become the world’s third-largest automotive manufacturer, while Toyota topped General Motors in global sales to claim the No. 1 sales position, according to vehicle sales figures released this week.

In the first six months of 2008, VW increased global sales 7.2 percent to 3.31 million cars and trucks, while Ford sales fell 11 percent to 3.09 million vehicles. During the same period, Toyota global sales grew about 2 percent to 4.82 million vehicles, while GM sales slid 3 percent to 4.54 million cars and trucks.

The announcement of the $1 billion assembly plant at Enterprise South industrial park is a sign of VW’s dedication to boosting sales in the United States, Mr. Wegehaupt said. Plans are to boost U.S. sales of VW and its luxury brand Audi to 1 million cars a year by 2018, more than triple the current number.

Volkswagen also plans to begin production of 150,000 cars a year at the new Chattanooga plant by 2011.

This year, the company is launching a new minivan for sale in the United States, the first time that kind of product has been made available by VW since early this decade.

VW officials have set an ambitious sales goal and production schedule for the United States despite the company’s previous setback at its first American assembly plant.

Mike Randle, publisher of Southern Business and Development magazine, said VW made “a catastrophic mistake” when it opened a manufacturing plant in Pennsylvania in 1978 only to shut it down a decade later when VW sales slumped.

Volkswagen was the first foreign automobile company to build cars in the United States since the end of World War II when it built the assembly plant in New Stanton, Pa., in the 1970s. By 1988, however, VW officials decided to close the 2,500-employee facility because of sluggish sales and five years of losses.

Mr. Wegehaupt said VW has been on the move for several years in emerging markets such as China. The new plants planned for Russia, India and the United States are seen as helping to fuel sales globally, he said.

Volkswagen on Thursday released artist renderings of what the massive auto assembly plant at Enterprise South might look like. The $1 billion facility will be similar to what Volkswagen completed last year in Russia and what it now is building in India, Volkswagen spokeswoman Jill Bratina said.

Take a peek at how the Volkswagen plant at Enterprise South might look.

The VW assembly plant represents the biggest manufacturing investment ever in Chattanooga.

Stefan Jacoby, Volkswagen Group of America’s chief executive, said that, in addition to selling more gas-powered vehicles, VW will try to develop this nation’s market for diesel-powered cars as it has in Europe.

“Volkswagen has a long-lasting diesel experience,” he said. “We are one of the worldwide leaders with diesel engines. We are very convinced that diesel will have a future here.”

Erich Merkle, an auto industry consultant for Crowe Chizek and Co., said VW’s attempt to beat Toyota will be tough because the Japanese automaker is a brutal competitor. He said VW needs to be careful about protecting its European presence, where it is the largest automaker by sales.

“While trying to go on the offensive, they’ve got to protect their home turf,” he said.

Jim Bruce, president of Atlanta-based Bruce Facility Planning Consultants, said the U.S. market is a huge and growing market long term. Chattanooga’s plant, which will join a VW facility in Mexico as the automaker’s only assembly facilities in North America, can cover a lot of ground, he said.

“You can service anything from the Panama Canal to the North Pole,” he said.

Staff writer Dave Flessner contributed to this story.