VW to invest $340 million in Tennessee to build new SUV

By David Shepardson

WASHINGTON (Reuters) - Volkswagen AG (VOWG_p.DE) announced on Monday that it plans to invest $340 million to build a new sport utility vehicle at its Chattanooga, Tennessee, plant in the United States as demand surges for larger vehicles.

It will build a five-passenger SUV that will be branded as part of the company's Atlas family. A concept version will be unveiled next week at the New York International Auto Show, the German carmaker said in a statement.

"We are not only committed to this market, we are committed to our U.S. manufacturing home in Chattanooga, Tennessee," it said.

Tennessee Governor Bill Haslam said Volkswagen in Chattanooga had grown "from a single vehicle producer, starting with the Passat, into what it is today - a thriving U.S. manufacturing operation that can produce three models, and counting."

The investment announcement is positive news for the U.S. car industry at a time when it is bracing for the impact of higher steel and aluminum tariffs on metal produced outside North America. Haslam told reporters last week the tariffs could add costs to manufacturers, especially automakers, that could be "very harmful."

VW said in February that 54 percent of its total own-brand volume sales were SUVs. In addition to a new seven-passenger Atlas that went on sale last year, VW also unveiled an all-new 2018 Tiguan SUV last year. Prior to 2017, most of VW's U.S. own-brand sales were cars.

VW is still working to improve its image in the United States after it admitted to cheating on diesel emissions tests in 2015, sparking the biggest business crisis in its history.

(Reporting by David Shepardson, Editing by Rosalba O'Brien)