Volkswagen on Tuesday announced plans to build a U.S. assembly plant in Chattanooga, Tennessee. The German automaker says it will use the facility to produce a car designed specifically for the North American consumer and invest $1 billion in the economy.

Initial production capacity for the facility is anticipated to be 150,000 vehicles, including a new midsize sedan designed specifically for the North American market. Production is scheduled to begin in early 2011.

The announcement seems to confirm that VW will build a successor to the Passat in America. As indicated by CEO Martin Winterkorn the car will get a new name, will replace the Passat, and will not be exported outside of North America.

The company will build the facility on a 1,350-acre site in the Enterprise South Industrial Park, located 12 miles northeast of downtown Chattanooga. Volkswagen will bring about 2,000 direct jobs to the area, and will add even more jobs in related sectors. It’s expected that these jobs will come from the tri-state area, pulling from the labor force of Tennessee as well as Georgia and Alabama.

“The U.S. market is an important part of our volume strategy and we are now very resolutely accessing that market,” said Martin Winterkorn, CEO of Volkswagen AG.

“Volkswagen will be extremely active there. This plant represents a milestone in Volkswagen’s growth strategy. We will be selling 800,000 Volkswagens in the U.S. by 2018, and this new site will play a key role. This, along with our growth strategy, is a prerequisite for the economic success of the company in the dollar region. We look forward to establishing an important mainstay for ourselves when we become the biggest European carmaker there.”