Volkswagen to Decide on North America Plant

Volkswagen will decide in 2008 where to build a new auto plant in North America, VW chief executive and management board chairman Martin Winterkorn said on Sunday.

"If it would be in the U.S. it would not be on the west coast," Winterkorn told reporters at the North American International Auto Show, adding that locations are being considered in Mexico and Canada as well as the United States.

A west coast location for a new assembly plant would be too far from VW's home base in Germany, the chairman of the world's fourth largest automaker said.

Since the year 2000, the euro has risen 82 percent against the dollar -- from $0.81 to $1.475 -- making it harder for European companies to be competitive on the U.S. market with goods made in the euro zone countries.

Winterkorn said the decision for a North American plant was linked to an increase in capacity and not for foreign exchange reasons as such.

Global unit sales for Volkswagen group rose 7.9 percent in 2007 to some 6.2 million vehicles, a record for the firm.

North America Sales Slipped

Winterkorn confirmed the group would make a pre-tax profit in 2007 of at least 5.1 billion euros, but he said he could not say by how much more.

Volkswagen last year brought forward its goal for reaching a pre-tax profit of at least 5.1 billion euros to 2007, from 2008, compared to 1.793 billion euros in 2006, due to cost cuts on wages and other structural spending.

The group sales in North America slipped 0.5 percent to 530,630 cars. Stefan Jacoby, chief executive of the U.S. operations, said that the aim remained to reach break-even in 2009, even with the current dollar/euro rate.

"Of course, if we have to take on the costs of the set up of a new factory, the equation will change. But outside the question of the factory we should reach break-even in 2009," Jacoby told reporters at the Detroit show.

"With the right products at the right time and the right costs we can do well on the U.S. market," Winterkorn said, adding Volkswagen was going to push on diesel after it sold 850,000 Jetta models with the TDI turbo diesel injection.

Volkswagen, the biggest volume carmaker in Europe ahead of France's PSA Peugeot Citroen, has been loss-making in the United States since 2002.

The group already produces in the dollar zone because it has a factory in Mexico.

Volkswagen's Jetta sedan model is among the most popular European cars in the United States, but in its European home base the Golf hatchback is its best selling model.

Volkswagen is the biggest investor in German truckmaker MAN and Sweden's Scania. MAN last month raised its voting stake in Scania to 15.57 percent as it aims to forge a tie-up with Scania and become Europe's truck market leader.

But Scania has rejected a hostile approach by the German firm. A tie-up would also concern VW's own truck business. Winterkorn declined to comment on developments but added: "The fact that you don't hear anything does not mean that nothing is happening."