Volkswagen, the biggest European car maker, said Tuesday it would invest up to 620 million euros (one billion dollars) in its first US plant to counteract effects of the euro's rise against the dollar.
The US market “is an important part of our volume strategy and we are now very resolutely accessing that market,” a statement quoted VW chief executive Martin Winterkorn as saying.
“Volkswagen will be extremely active there,” he pledged, the same day that US giant General Motors warned of “significant” second quarter losses and unveiled a fresh restructuring and cost-cutting program to battle slumping sales.
The VW factory is to be built in Chattanooga, Tenessee and begin producing cars in 2011 according to a statement released in Germany after a meeting of the group's supervisory board.
“We will be selling 800,000 Volkswagen per year in the US by 2018, and this new site will play a key role,” Winterkorn forecast.
VW had been searching for the location of an assembly line to protect it from a relentless rise of the euro that has affected profits in North America.
“This, along with our growth strategy, is a pre-requisite for the economic success of the company in the dollar region,” Winterkorn added.
Earlier Tuesday, the single European currency set a new record above 1.60 dollars as the greenback was hit by mounting fears over the stormy US economic outlook, dealers said.
The VW statement added that the automaker also wanted US customers to perceive it as a domestic manufacturer.
The German auto giant already has a plant in Mexico but it does not make enough cars to supply all of North America, where VW currently has a market share of around two percent.
The group wants to at least triple that figure within 10 years and said Tuesday it would produce a new midsized sedan “tailored specifically to the US market” at the new plant.
VW has already begun to restructure activities in the United States, which have posted losses for several years.
In addition to vehicle production, distribution and marketing activities are covered by the measures.
In Chicago, GM said that strikes, a soft market and an “adverse vehicle segment mix” would result in a significant second-quarter loss.
Those losses would be deepened as a result of “significant charges” GM expected to report related to a massive restructuring programme of its own initiated in 2005.
GM has already cut its US workforce by more that 40,000 employees as it shuttered plants in the wake of losses which have topped 54 billion dollars since 2005.
VW said it would hire around 2,000 workers to work at the Chattanooga plant.
Investors welcomed the news and shares in the German group closed on Tuesday with a gain of 2.34 percent at 174.23 euros.
The Dax index of leading shares was off by 1.91 percent overall at 6,081.70 points, the first time it had fallen below 6,100 points since October 2006.
