“Volkswagen and Chattanooga have a lot in common,” said Chattanooga City Mayor Ron Littlefield. “Both are serious about environmental sustainability and 21st Century manufacturing.”

After losing the bid for Toyota's new manufacturing site to Tupelo, MS, Chattanooga, TN is celebrating being picked over two rival sites for a new U.S. Volkswagen assembly plant expected to create about 2,000 jobs.

Volkswagen Group of America Inc. said it will produce a new midsize sedan designed specifically for the North American consumer and expects to invest and approximate $1 billion in the economy.

Rival sites under consideration were in Alabama and Michigan, as Volkswagen, Europe's biggest automaker, seeks to strategically recreate a larger manufacturing presence in America.

In a company statement, VW said that the plant near the Georgia and Alabama borders would create 2,000 direct jobs and "add a significant number of jobs in related sectors." A similar company statement from parent Volkswagen AG said the company approved up to $991.4 million to build the facility, with the plant aiming for a capacity of 150,000 cars a year. It plans to start production in 2011.

The company's statement indicated that Tennessee helped entice Volkswagen as "incentives are tied to job creation and capital investment. Additional support includes assistance for public infrastructure and job training..."

Japanese-owned Nissan is also located in TN, south of Smyrna, TN.

"Chattanooga is an excellent fit for the Volkswagen culture, having an exceptional quality of life and a long manufacturing tradition," said Stefan Jacoby, President and CEO of Volkswagen Group of America.

The 1,350-acre site at Enterprise South Industrial Park near interstates 75 and 24 between Nashville and Atlanta has long been seeking an auto assembly plant.

In addition to the Toyota loss, Chattanooga previously lost out on the $1.2 billion Kia Motors Corp. plant that went to West Point, Ga

Volkswagen holds only a 2 percent share of the U.S. market. VW officials have said the company intends to more than triple its U.S. sales to 1 million by 2018.

Reportedly, the new plant in the U.S., in addition to its factories in India and Russia, is part of the company's strategy to become the world's No. 2 automaker.

The automaker has said the surging euro has pushed along plans for a new production facility. The 15-nation currency hit a record high of $1.6038 on Tuesday, making goods exported from Germany more expensive in the United States.

While competing against Alabama and Michigan, Tennessee officials in recent weeks approved $1.25 million for work at the Chattanooga site that was once part of an Army ammunition plant complex. State officials have not released the incentive package that was used as bait to attract Volkswagen.

The South is known for ample highway and rail connections and the network of centrally located suppliers, but the main attraction appears to be the pool of workers who have shown at other European and Asian assembly plants that they understand lean manufacturing concepts and the critical nature of team based assembly without the often complicating presence of the United Auto Workers.

Industry executives and analysts have said there is plenty of room for more auto makers in the region, as long as the plants are at least 40 or 50 miles apart to avoid competing for skilled workers.

North America headquarters for Volkswagen were relocated earlier this year from suburban Detroit to northern Virginia.

Volkswagen's only other North American plant is in Puebla, Mexico. The company closed its last U.S. production facility near Pittsburgh in 1988.

VW brands include VW, Audi, Skoda, Bentley, Bugatti and Seat and shares of Volkswagen stock went up 2% after the announcement.