Volkswagen eyes U.S. plant decision in '08

By Jui Chakravorty

DETROIT (Reuters) - Volkswagen AG (VOWG.DE: Quote, Profile, Research, Stock Buzz) will decide in the first half of 2008 whether to go ahead with plans for a U.S. plant, as the German automaker aims to revive its popularity in the country, VW's chief executive of American operations said.

VW, which lost more than $800 million in North America last year and has not been profitable in the region since 2002, plans to increase U.S. sales to 1 million units by 2018, Stefan Jacoby said at the Reuters Autos Summit in Detroit on Monday.

Jacoby, who took his current post in September, said he wants the company to do a better job making products that fit the American market. The automaker sold about 600,000 cars in the United States annually in the 1970s, he said, meaning sales have been cut nearly in half even as the market has grown.

Now, as the U.S. market is expected to shrink and U.S. automakers try to grow abroad, Jacoby wants to expand in the world's largest auto market -- he plans to sell 800,000 units of the flagship VW brand and 200,000 Audis annually by 2018.

"With all the history we have here, and the potential of the iconic brand of VW, we have a good chance to make this strategy come to life," Jacoby said. "The most important thing is, we need much deeper localization."

In considering potential U.S. plant locations, Jacoby said VW would look at the time zone since it would have to be compatible with German work hours, eliminating the West Coast.

He also said VW would look at availability of a good work force before narrowing possible sites to three or four states.

Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) this year chose Mississippi for a $1.3 billion assembly plant set to open in 2010, after states engaged in a bidding war to lure the Japanese automaker.

Jacoby would not say more on where a plant might be located, except that vehicles made there would be ready for production between 2010 and 2012.

Volkswagen, which will sell about 330,000 vehicles in the United States this year, does not have a plant in the country.

Jacoby said VW plans to expand its U.S. model line-up with a new midsize sedan, or a "Camry fighter," and two crossover vehicles, starting in 2009. He also said the next generation of the Tiguan compact sport utility vehicle could be built in the United States.

U.S. sales have been hurt by a weak housing market, tighter lending standards and high fuel prices. Annual sales are expected to come in at roughly 16 million units in 2007, which would be their lowest tally since 1998.

Sales are set to worsen next year, with one estimate as low as 14.5 million units, which would be the weakest since 1991.

"With today's economic environment, it's obvious if you continue to do like we are doing right now, we are not able to turn this around," Jacoby said.

(Editing by Braden Reddall)

(For summit blog: summitnotebook.reuters.com/)