WOLFSBURG -- Volkswagen could build a new high-volume car in Mexico.
The move would be part of VW's plan to significantly increase its production and purchasing in US-dollar economies because of the euro's strengthening against the currency.
The car would be built at the VW plant in Puebla, Mexico. The factory has a capacity to build 500,000 units annually. It currently builds 300,000 Jettas and New Beetles a year.
VW CEO Bernd Pischetsrieder said the company has made no decision on which model will fill the gap, but said the new Golf would not be considered because of low US demand for the car.
Mexico's currency is tied to the dollar so building more cars there for the US market would ease VW's currency woes.
Pischetsrieder said the weak US dollar is "currently our greatest burden."
Financial analysts say VW is being hit harder by the weak dollar than other European automakers because VW was slow to hedge itself against currency fluctuations. VW was about 40 percent hedged last year compared with 70 percent this year.
Pischetsrieder said building a new plant in the USA is "out of the question" while there is still overcapacity within the worldwide VW network.
VW will invest $2 billion (E1.58 million) in the Puebla plant by 2008. The plant will be the sole production base for the next-generation Jetta/Bora.
North America is VW's No. 3 market in sales volume after China and Germany.
VW's 2003 North America sales were 10 percent below the company's forecast. Last year VW sold 302,686 cars in the USA compared with 338,125 the previous year.
The automaker's US sales are affected because high-volume models Jetta, Golf and Passat are nearing the end of their life spans.
Plus, VW's US customer incentives of between E1,300 and E1,500 are only one-third of what US-based manufacturers offer.