VW to Make Decision on New SUV in Fourth Quarter

A decision on whether Volkswagen AG VOW3.XE 0.93% will build a new hybrid sport-utility vehicle at a plant in Tennessee or Mexico is expected to be announced in the fourth quarter, one of the company's executives said on Monday.

The Chattanooga, Tenn., plant is anxiously awaiting a decision since adding the vehicle winning would mean a significant increase in jobs, said Frank Fischer, VW's chief executive of the plant, on the sidelines of an annual conference. The facility—now employing 2,600 workers—is home to the Passat. Typically, between 500 and 1,000 jobs would be created when another vehicle is added to a plant.

"We are in the process but we expect a decision by the end of the year," Mr. Fischer said. The company could announce a plant choice or kill the project altogether.

Speculation has been swirling since the auto maker first unveiled the CrossBlue, a three-row diesel-electric plug-in hybrid SUV, aimed for the U.S. market at the North American International Auto Show in Detroit in January. The vehicle is expected to achieve an estimated fuel economy rating of 35 miles per gallon combined and 89 mpg equivalent in electric mode.

VW Chief Executive Martin Winterkorn reportedly told dealers in July the auto maker was committed to selling a seven-seat SUV in the U.S.

Production of the vehicle could start as early as 2015.