Volkswagen to Increase Mexican Production

MEXICO CITY December 8, 2004; The AP reported that German auto giant Volkswagen AG said it would produce 320,000 cars at its central Mexican plant in 2005, about 39 percent more than this year, to capitalize on the weaker dollar.

Hurt by slow sales in the United States, Volkswagen's Mexican arm produced 20 percent fewer autos this year than in 2003, when its plant outside the colonial city of Puebla built 287,000 units, Thomas Karig, Volkswagen's cooperate relations director, said Wednesday.

The company's new Jetta, which will be sold as the Bora model in Mexico, will be produced in a new wing of the Puebla operations, where workers will assemble parts arriving from Brazil, Karig told foreign reporters.

Production of the overhauled Jetta will account for 200,000 of the cars the Puebla plant will produce in 2005, he said.

The Puebla operation, Volkswagen's only North American factory, employs about 13,300 workers and is also the only place where the new Beetle sedan and convertible are built. About 70 percent of production is exported.

The company has been producing about 70,000 new Beetles per year and will try to maintain that level, Karig said.

Puebla will be the only plant outside China producing the new Jetta, which will replace its predecessor everywhere but in Mexico, where about 20,000 of the old models will be made for the local market next year.

The Puebla facility shut down entirely in November so that the company could lower inventories and prepare for assembly of the new Jetta.

The euro's rise against the dollar gives the company a chance to take greater advantage of its Mexican facility, Karig said. Mexico's peso tends to rise and fall with the U.S. currency so that a slip in the dollar means cars produced here become more competitive relative to those produced in Europe or Asia.

In the past three months, the dollar has fallen more than 10 percent against the euro.