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Volkswagen says it plans to invest $7 billion in North America

The logo of German carmaker Volkswagen is seen at a VW dealership in Hamburg, October 28, 2013. Volkswagen is due to present company results
The logo of German carmaker Volkswagen is seen at a VW dealership in Hamburg, October 28, 2013. Volkswagen is due to present company results

By Edward Taylor and Laurence Frost

DETROIT (Reuters) - Volkswagen AG said on Sunday it plans to make a sport utility vehicle tailored for the North American market and will invest $7 billion in the region as it seeks to increase sales.

Europe's largest automaker reiterated its goal of selling 1 million Volkswagen and upscale Audi vehicles annually in the United States by 2018 as it launches more locally made cars.

The company said the move was a sign of renewed commitment to the market after a sales decline by its core VW brand, which continues to achieve low U.S. quality scores.

"The Volkswagen brand is and remains at the heart of our product strategy here," CEO Martin Winterkorn told reporters in Detroit on the eve of the North American Auto Show.

The $7 billion is to be spent over five years as part of investment plans previously announced at a global level by the Wolfsburg, Germany-based group. VW said the new seven-seater SUV would be launched in 2016.

Winterkorn declined to say whether the new vehicle would be assembled at VW's Chattanooga, Tennessee plant or in Mexico, where production of the Golf compact begins next week.

Volkswagen's Phaeton sedan, the brand's luxury flagship, will also return to the U.S. market in 2016, he said.

In 2013, Volkswagen Group, which also owns the Porsche, Bugatti, Lamborghini, Skoda and Seat marques, sold 600,000 cars in North America.

But the company last month ousted U.S. chief Jonathan Browning and replaced him with after-sales specialist Michael Horn after the VW brand's sales fell 7 percent.

The carmaker must improve "the speed at which we bring new models to the market and innovation to the market", Horn told Reuters on Sunday. "We have already been improving."

As part of a product offensive, Audi also plans to launch the A3 compact and Q3 compact sports utility in North America this year.

(Editing by Leslie Adler and Matt Driskill)

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