MEXICO CITY -- Volkswagen AG will start building a $550 million gasoline engine plant in Silao, in the central Mexican state of Guanajuato, next month, the company said.
The plant will build an engine known inside VW as an "888," said Thomas Karig, a VW vice president. It is a four-cylinder engine that will be available in 1.8- and 2.0-liter versions and is based on a similar-sized Audi engine.
The plant will be completed by 2013 and have a capacity of 330,000 engines a year, which it will supply to VW's assembly plant in Puebla, Mexico, and the plant being built in Chattanooga, Tenn. The Chattanooga plant is scheduled to begin building a new mid-sized sedan early next year.
The Puebla complex assembles the VW Jetta for the United States and other models for Mexico and Latin America. It built the New Beetle until August and is expected to build a redesigned New Beetle for the 2012 model year.
The engine plant will be built on 148 acres close to a General Motors Co. truck plant and a cluster of two dozen auto industry suppliers.
A VW spokesman said the German company also considered sites in the states of Coahuila and San Luis Potosi as well as Puebla state before deciding on Silao. He said Chattanooga never had been in the running but could not say whether other U.S. sites had been considered.