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MEXICO CITY -- Volkswagen will increase production capacity at its assembly complex in Puebla, Mexico, to 550,000 vehicles a year from 450,000 as the plant prepares to build a new compact sedan for world markets, the company's CEO in Mexico says.

In an interview here last week, Otto Lindner told Automotive News that production of the compact will start in 2010.

"We can't say what it will be, but it will be a world car, with the exception of China," he said.

New output record

The plant, 75 miles southeast of Mexico City, is operating at maximum capacity. Lindner said 450,000 passenger cars will be assembled there this year, which would be a plant record. The previous record of 425,700 was set in 2000.

"The plan is to increase installed production capacity to 550,000 vehicles a year. We will reach this probably in 2011," said Lindner, 59. Before moving to Mexico four years ago, he directed the Audi assembly plant in Ingolstadt, Germany.

This year, he said, Puebla will assemble 210,000 Jettas, known in Mexico as Boras; 110,000 SportWagens, also known as Golf Variants; 80,000 former-generation Jettas; 34,000 New Beetle sedans; and 16,000 New Beetle Cabriolets.

In the first half of 2008, 84 percent of the vehicles assembled at the plant were exported, a trend likely to continue. The United States and Canada were major markets but not the only export destinations. Just over 40 percent of total production, primarily SportWagens, will be shipped to Europe this year, Lindner said.

The production program for the new compact sedan will account for most of the $1 billion investment in Puebla that VW CEO Martin Winterkorn announced during a visit to the plant in February, Lindner said.

"About 70 percent of the investment will be VW's, and 30 percent will come from the supplier network," he said.

VW is building a 65,000-square-foot stamping shop, a 265,000-square-foot body shop and an 85,000-square-foot logistics shop on the northern edge of the Puebla complex.

The automaker also is extending the 117,000-square-foot paint shop by 70,000 square feet and adding 104,000 square feet to the 301,000-square-foot assembly shop.

60% Mexican parts

Lindner said 60 percent of the parts used at Puebla are provided by suppliers based in Mexico. The new goal is to have 90 percent of the parts come from Mexico, Canada and the United States, starting in 2010, he said.

"This is also the reason we installed a new purchasing board member in Mexico who is responsible for all purchasing activities in North America," Lindner said, referring to Rudiger Koch.

The pressure to source more parts from North America is great, Lindner said. A local content of 60 percent "is too low," he said, adding that "European parts are very expensive now" because of an unfavorable dollar-euro exchange rate.

"So the activity of localizing parts is very important," Lindner said. "To be independent of these exchange rates, we have to localize more."

Lindner said the Puebla plant has 240 suppliers based in Mexico, 60 total in the United States and Canada, 60 in Europe, 10 in Asia and 30 in Brazil.

"We would like to move a lot of this to the dollar region," he said.

Lindner said one of the major benefits to the Puebla plant of VW's planned new assembly plant in Chattanooga, Tenn., will be a "better supplier network." Chattanooga is scheduled to launch production in 2011.