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CHATTANOOGA, Tennessee -- Volkswagen will produce a mid-sized sedan "tailor-made for the American consumer" at its factory here when production begins in late 2010, Volkswagen Group of America CEO Stefan Jacoby said today.

Jacoby said the sedan, which will come to market for the 2011 model year, will be similar in size to today's Passat, but will not replace the Passat.

"The Passat remains the Passat. The Passat will be positioned above that mid-sized sedan," Jacoby told Automotive News. "That mid-sized sedan is a Malibu fighter, an Accord fighter and it's a Camry fighter."

Initial capacity at the $1 billion factory will be 150,000 vehicles annually. "Of course we can and will extend the capacity later," to 200,000 vehicles, Jacoby said.

All the vehicles produced initially at the plant will be Volkswagens, Jacoby said. But the factory will be flexible enough to add a brand or brands.

"We are planning to start with Volkswagen here. We have right now no concrete plans to integrate other brands in this factory," he said.

Jacoby noted that affiliate brand Audi also is investigating the possibility of North American production. A decision is expected next spring.

"It works a little differently for Audi than for the Volkswagen brand. Volkswagen is in the volume segment, and we want to be in the volume segment. Audi is definitely a premium brand. It looks different," Jacoby said.

He said it was "too early" to comment on the possibility of VW producing a new SUV or crossover at the Chattanooga factory.

Automotive News reported this week that a new SUV is being considered. The vehicle would slot between the compact Tiguan, which went on sale in the United States this year, and the larger Touareg SUV, which has been foundering in the United States.

Engines and transmissions for the Chattanooga-made vehicles will come from Volkswagen's Puebla, Mexico, factory, which also produces the New Beetle family and Jetta sedan. Jacoby said both factories would be integrated in the future and hinted that more powertrain production could be coming.

Said Jacoby: "We are planning in respect of environmental issues but also fuel consumption issues to introduce later modern engine and gearbox technology as well, but we have not yet decided where we will produce this."