FRANKFURT, Germany -- Volkswagen AG is headed to Tennessee to build cars in the U.S. after picking the southern state as the site for its new plant.

Vehicle production is scheduled to begin in early 2011, according to a company news release. Volkswagen said it will employ a staff of about 2,000 at the site, with additional jobs to be created in the future.

The announcement came Tuesday from Lower Saxony Minister President Christian Wulff, who sits on the supervisory board of Europe's largest automaker.

Chattanooga, Tenn., beat out bids by Alabama and Michigan for the new plant, which is part of the Wolfsburg-based company's strategy to increase its presence in the United States.

The first stage of construction is designed to provide capacity for the production of 150,000 cars annually, including body-production, paint-shop and assembly operations.

The first vehicle to be manufactured there will be a new midsize sedan tailored specifically to the U.S. market.

"The U.S. market is an important part of our volume strategy and we are now very resolutely accessing that market," chief executive Martin Winterkorn said in the statement. "Volkswagen will be extremely active there."