Volkswagen To Invest $2 Billion On Mexican Facilities; Mexican Parts Suppliers To Benefit.

Volkswagen AG said it plans to invest $2 billion in Mexico over the next five years to revamp local facilities and accommodate production of its new Bora/Jetta model.

Reinhard Jung, head of Volkswagen's Mexican operations, said the Bora/Jetta model will be made only at the company's Puebla plant, and exported to Europe, the United States and other key markets. The plant expansion will create 1,500 jobs, and between 4,000 and 5,000 indirect jobs, mostly in the domestic auto parts industry, Jung said.

The investment plan includes $180 million for the new models. Volkswagen plans to produce 300,000 a year by 2005. The Puebla plant, located 60 miles east of Mexico City, is the only production site of the New Beetle and its convertible version, the Beetle Cabrio.

Volkswagen is Mexico's third-largest car manufacturer after General Motors Corp. and Daimler-Chrysler AG. Volkswagen is taking advantage of Mexico's free-trade agreements with the United States, Canada and the European Union, as well as recent pacts signed with Argentina and Brazil.

Economy Minister Luis Ernesto Derbez said. Jung said total annual output at the Puebla plant is expected to increase to 430,000 units in 2005 from the 332,000 last year. With the launch of the new Beetle Cabrio, production is expected to rise to 350,000 units this year.