James R. Healey

USA TODAY

Volkswagen says it will build a mid-size, seven-passenger crossover SUV at its Chattanooga, Tenn., factory in 2016, adding 2,000 jobs and helping VW plug a hole in its U.S. lineup.

VW says it will invest $900 million — $600 million of that directly in Tennessee — to expand operations at Chattanooga, where it builds the Passat mid-size sedan.

Tennessee is contributing $165.8 million top help pay for the plant expansion,and $12 million to train new workers.

The move comes amid simmering uncertainty involving the United Auto Workers, which lost a vote earlier this year in its effort to organize and represent the VW workers at Chattanooga. The UAW is establishing Local 42 in Chattanooga anyway, and inviting workers to join.

The UAW has failed several times to organize Nissan's Smyrna, Tenn., factory.

In simultaneous announcements today at Chattanooga and VW's Wolfsburg, Germany, corporate headquarters, the automaker said it also will establish an "independent National Research & Development and Planning Center of the Volkswagen Group of America" at Chattanooga, intended to better include U.S. priorities in vehicles. About 200 engineers will work there.

"The Volkswagen brand is going on the attack again in America," said Martin Winterkorn, chairman of the Board of Management of Volkswagen AG, the parent company, in Wolfsburg.

"This vehicle will be a real American — large, attractive and with many high-tech features on board. Above all, the midsize SUV will be made by real Americans," he said.

VW has other North American production facilities, building the Jetta and Golf models in Mexico.

The automaker says it will add 538,000 square feet of floor space and will integrate assembly of the new SUV with the Passat assembly, but didn't confirm the logical assumption that the SUV will be based on the Passat

The CrossBlue concept vehicle showed at the 2013 North American International Auto Show in Detroit is the basis for the new vehicle, VW says, and the new SUV is being "developed especially for the North American market."

The show vehicle had seating for six, in three rows of two. VW says the production model will seat seven, also in three rows. Some versions of the concept car have showcased a diesel-electric hybrid powertrain, a setup that could be good for 60-plus mpg, but VW has said it would be too expensive for a production vehicles.

"The Chattanooga-built midsize SUV will allow us to fulfill the wishes of our dealer network, bringing new customers to our showrooms and additional growth for the brand," said Michael Horn, CEO of VW Group of America. "We are eager to be entering this growing vehicle segment with a world-class, seven-passenger SUV from Volkswagen."

Best-selling SUVs in the U.S. the first half of 2014 are compact, two-row models: Honda CR-V and Ford Escape.

VW's current crossover SUVs are the compact Tiguan, a rival to the CR-V and Escape but selling about one for every 12 of the competitors, and the larger, two-row Touareg, which VW considers a premium SUV that should be compared to the Mercedes-Benz M-class and its ilk. VW sells about one Toureg for every six or seven M-class vehicles.

The automaker's U.S. sales are down 13.4% this year, according to Autodata. Overall new-vehicle sales are up 4.3% int he same period.