After deciding to build a new plant, the next thing that Volkswagen need is powertrains. Last year for example, the Puebla factory turned out 340,000 engines, well below its annual capacity of 500,000. But this are gasoline engines, but the company also needs diesel and hybrid.

Stefan Jacoby, CEO of Volkswagen of America said the vehicles produced in Chattanooga will be offered in gasoline, hybrid and diesel versions. "We are one of the technology leaders worldwide with diesel technology, and we are very convinced that diesel will have a future here in the United States," Jacoby said.

So where will Volkswagen get the additional engines, not to mention transmissions? Importing from Europe is one option, but that would erode the currency advantage that Volkswagen hopes to gain by building a U.S. factory.

The euro has been gaining steadily on the U.S. dollar in the past couple of years, making goods produced in Europe more expensive in the United States. A year ago, $1 was worth 0.79 euros. Late last week, $1 was worth 0.63 euros.

As it stands now, Volkswagen doesn’t produce any transmissions in North America, said Thomas Karig, vice president of corporate relations and strategy for Volkswagen de Mexico.

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Source: Automotive News

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