VW prototypes on local horizon

U.S. MARKET* VW officials said they see 2010 new vehicle sales by all makers at about 11 million units, up from 10.4 million. In a few years, sales could grow to about 15 million vehicles.* The compact and midsized sedan markets are expected to increase stronger and quicker than the rest of the market, according to VW.* Audi production could work in Chattanooga, but at "a later time," a VW official said.

HERNDON, Va. -- Volkswagen's Chattanooga plant over the next several months is on track to start making its first prototypes of the German automaker's planned, new midsize sedan, officials said Sunday.

The plant now well under construction is entering a key 12-month period as it's readied to produce autos for sale in early 2011.

"We're really looking forward to launch," said Frank Fischer, chief executive of VW's Chattanooga operations, to foreign automotive and American journalists at the carmaker's U.S. headquarters outside Washington, D.C.

Mr. Fischer said people who have seen earlier prototypes of the sedan made in Germany are "very, very pleased" with the vehicle, which will be all-new to VW and will target American car buyers.

He added that the Chattanooga plant, expected to make 150,000 vehicles a year, has "massive expansion possibilities" and could make even more.

Audi production could work in Chattanooga, but at "a later time," Mr. Fischer said.

Stefan Jacoby, CEO of VW Group of America, told the journalists, most of whom continued to Detroit for the opening of an international auto show today, that success at Chattanooga's $1 billion factory is vital to the car company selling more vehicles in the U.S.

"With Chattanooga ... we're laying the groundwork to be profitable in the U.S. and have a durable business in the U.S.," he said.

VW plans to about double U.S. sales to 400,000 in the next year or so and then sell 800,000 cars by 2018.

"Chattanooga has to be finished on time and it looks like it will be," Mr. Jacoby said about the Enterprise South industrial park factory.

Mr. Jacoby said it's important for VW to return to U.S. production after a couple of decades of closing a Pennsylvania plant.

"With Chattanooga, we can speed up the market and react faster to the market," the official told journalists from Europe and China.

Mr. Fischer said VW is entering "a very critical period" in the building of the 2 million-square-foot plant that will employ more than 2,000 people.

He said VW is prepping the supplier park, where at least a half-dozen companies are expected to land by midsummer. "All the suppliers have to get ready," Mr. Fischer said.

Mr. Jacoby said VW is coming off a good year in the U.S. with increased market share by 22 percent or 2.05 percent of the American car market.

He said the compact Jetta is its "bread and butter," with 25 percent of its sales holding VW's clean-diesel technology. Mr. Jacoby said CC sedan sales also are doing well, and the market for compact cars and sedans is expected to grow in future years.

He said brand loyalty is higher for VW vehicles, and initial quality has improved with VW landing in the middle of the pack in 2009. Lexus and Porsche, which has become a VW brand in recent months, headed the J.D. Power survey.

In the past, Consumer Reports magazine did not recommend any VW vehicles, but that is changing and will help the automaker, Mr. Jacoby said. He said its GTI, Passat and Jetta TDI all won most appealing awards in 2009.

But, he came back to the Chattanooga plant as a linchpin to the company's strategy.

"We can't sell 800,000 cars without producing on local terrain," Mr. Jacoby said.

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