UPDATE 1-Volkswagen to invest $1 bln in Mexico plant

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MEXICO CITY, July 14 (Reuters) - Volkswagen will start producing a new model at its plant in Mexico next year as it invests $1 billion to expand the site, a company spokeswoman in Mexico told Reuters on Tuesday.

The German company had planned a big investment in North America, possibly opening a plant in the United States or Canada, before the global financial crisis hit last year.

Spending the money on expanding its key Mexico plant comes as carmakers around the world face slumping demand due to the economic downturn.

"The production of the new model will start in March or April of 2010," spokeswoman Consuelo Minutti said.

She declined to say which car Volkswagen will add to its line-up at the plant in the central state of Puebla, the company's only North American facility and the sole producer of the popular New Beetle model.

Company officials in Germany could not immediately be reached.

Mexican auto production, geared to supplying the U.S. market, plunged 48.1 percent in June, year over year, while exports fell 44.6 percent. (Reporting by Tomas Sarmiento; Editing by Steve Orlofsky)