June 19, 2014 / 6:27 PM / 5 years ago

Volkswagen set to build SUV in Tennessee: report

A Volkswagen logo is seen on the front of a Volkswagen vehicle at a dealership in Carlsbad, California, April 29, 2013. REUTERS/Mike Blake

FRANKFURT (Reuters) - Volkswagen AG (VOWG_p.DE) is nearing a decision to pick its Chattanooga, Tennessee plant over a site in Mexico to build a new seven-seater crossover vehicle for the North American market, a German newspaper reported on Thursday.

The state of Tennessee is offering tax breaks, staff training, free land and infrastructure upgrades worth about $300 million in total, giving it a clear edge over Puebla, Mexico, daily Frankfurter Allgemeine Zeitung cited company sources as saying.

VW declined to comment.

Volkswagen unveiled plans in January to make a sport utility vehicle tailored for the North American market to be launched in 2016.

The company said at the time the move was a sign of renewed commitment to the market after a sales decline by its core VW brand, which continues to achieve low U.S. quality scores.

Reuters in January cited a source familiar with the matter as saying VW favoured the Tennessee factory over Mexico, where VW makes the Golf compact.

U.S. deliveries of VW’s core passenger-car brand fell 7 percent in 2013 as a push into competitive midsize cars lost traction, and analysts have said it needs more models designed for American consumers and manufactured competitively in the region.

Group vehicle sales, also including Audi luxury models, fell a further 4.6 percent in the United States in the first five months of this year, the company said.

Reporting by Ludwig Burger and Andreas Cremer; editing by Jane Baird

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