Volkswagen to Invest $1 Billion in Mexico Plant to Build Unspecified New Model

Volkswagen to Invest $1 Billion in Mexico Plant to Build Unspecified New Model

Mexican President Felipe Calderon announced this week that Volkswagen will invest more than $1 billion in its factory in the state of Puebla, with more than $400 million of the investment going toward the launch of a new compact sedan in 2010.

The news comes on the heels of a July 15 announcement by VW that it had decided to construct a $1 billion plant in Chattanooga, Tennessee, where the automaker plans to build a newly designed mid-sized sedan beginning in 2011.

That's a $2 billion commitment in less than two weeks at a time when most automakers are wracking their collective brains trying to cut costs.

VW spokeswoman Consuelo Minutti told Reuters that production of the new compact sedan at the Puebla factory will start in March or April of next year, but for security reasons she would say nothing more about the compact sedan.

That said, the Mexico plant already produces the Jetta and New Beetle, primarily for U.S. consumption. It's a good bet that the unnamed successor to the U.S.-market Passat will be build at the new Tennessee plant.

But as for the new small car at the Puebla plant, where the popular Polo (pictured) and Up! are currently being produced primarily for the European market, it's anybody's guess which Ford VW might be added to production.

However, Ford VW has previously announced its intentions to bring Polo to America, and earlier this month CEO Martin Winterkorn said a range of electric passenger cars would reach the market by 2010.

One of them could be an electric Up! that would cost only about $2,700 more than the conventional model of the city car, according to our sources. Now that would be cool!

Scott Doggett:  is an AutoObserver.com Associate Editor.