MEXICO CITY (AP) -- Volkswagen says it will begin manufacturing a new compact sedan at its plant in Mexico, with a launch date of 2010.

Volkswagen's head of Mexico operations, Otto Lindner, says engineers are developing the model.

Lindner made the announcement Monday at the automaker's plant in the city of Puebla. He said Volkswagen will invest $1 billion to increase plant capacity, modernize production lines and develop and produce the new model.

He did not give details about the vehicle.

President Felipe Calderon called the announcement "a reason to be happy for Mexico" and its auto industry, which has been hit hard by sagging demand from the U.S. amid the economic crisis.

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