Herndon, Va.-- Volkswagen AG will retain the Passat name for an all-new midsize car that it will build and launch this year in the United States to expand its presence, sources familiar with the situation said Sunday.

Volkswagen is expected to confirm the decision to keep the nameplate later tonight at a party on the eve of the North American International Auto Show press preview.

The sources said the rationale for keeping the name was the good reputation of the Passat, whose biggest handicap in the U.S. market was its price. They said the new model -- which Volkswagen has been calling the New Midsize Sedan, or NMS -- also shares many components with the European Passat.

Volkswagen will produce the new midsize model at a new, $1 billion plant in Chattanooga, Tenn., which is starting now to assemble cars. By producing the car locally, VW will be able to set a starting price of around $20,000 -- in line with the starting prices of the leading contenders in the midsize car segment, and around $7,000 below the outgoing European-made Passat's starting price.

The new, roomier model has been developed with American tastes in mind. "We have to acknowledge these market-specific requirements if we're to continue to build on VW's momentum in the United States," Jonathan Browning, president of Volkswagen Group of America, said at a presentation here today.

VW aims to increase U.S. sales to 1 million vehicles, including 800,000 VW-brand models, by 2018 as part of an objective to become the world's leading automaker. Last year, VW sold 360,000 vehicles in the United States, including 257,000 VW-brand cars and light trucks. That represented 3.1 percent of the market.

This year, VW expects to increase sales of VW-brand vehicles to 300,000, in an overall market that it forecasts will grow to 13.1 million light vehicles from 11.6 million in 2010.

Browning did not provide a sales forecast for the new Passat but said it was expected to be a top seller for the company, generating volumes similar to those of the recently launched all-new Jetta compact.
VW sold just over 120,000 Jettas last year.

VW's Chattanooga plant represents the Wolfsburg, Germany-based automaker's return to the United States as a producer of vehicles. VW, once the leading import brand in the United States, had built vehicles in Pennsylvania between 1978 and 1988.

The Tennessee plant has the capacity to turn out 150,000 cars a year. Its capacity could be increased to 250,000, with some modifications, and VW has room on the site to expand production capacity to 500,000 vehicles a year, plant director Frank Fischer said.

[source: topix.com]