Hoping to jump-start a stalled car market, Volkswagen unveiled a new model on Wednesday in Brazil as its seeks to recover the top spot in Latin America's biggest economy, Reuters reported.

The news agency said the launching of the compact Fox is the latest move in VW's drive to overhaul its operations in Brazil, where it recently lost its title as top car seller to General Motors.

With the new model, VW hopes to woo cash-strapped Brazilians back to new car showrooms by offering a medium-priced vehicle accessible to middle-class consumers, Reuters said.

"From the beginning of the project, our goal was to produce a car that could fit in the consumer's pocket while still offering quality," Paul Fleming, the president of VW's Brazilian operations, said in a statement cited by the news agency.

Reuters said the Fox, which will come with either a 1.0- or a 1.6-litre engine, will have a starting price of 20,990 reais ($7,390) and VW hopes it can fill a price void between its leading models in Brazil - the popular Gol, which goes for as low as 15,200 reais, and the more spacious Polo, which costs 28,500 reais.

Like its rivals, VW has seen its sales dwindle in recent years in Brazil amid an economic slowdown while sky-high interest rates aimed at curbing inflation have also hit the sector hard, choking the consumer credit market, Reuters said.

In the first nine months of the year, VW sales in Brazil slumped 20% to just 190,500 cars, slipping behind GM and Fiat which sold 207,600 and 199,500 respectively, the report added.

The Fox was launched on the same day that VW executives in Germany said the company would take a €120 million euro ($US140 million) charge in the third quarter for restructuring measures at its troubled Brazilian operations, Reuters noted, adding that Europe's biggest car maker is slashing nearly 4,000 of 25,000 jobs in Brazil, where it has the capacity to assemble 740,000 vehicles a year but is producing closer to 470,000 because of weak demand throughout Latin America.

"We've been facing crises since 1997 and our growth projections for the (Brazilian) market have all turned out to be wrong," Peter Hatz, VW's global vice president of human resources, told Reuters at a news conference.

Reuters said VW expects to sell 8,000 of the new Fox models in Brazil and also has plans to export the car - which is built to run on both petrol and cane-based ethanol - initially to other Latin American nations and to Europe in 2005.

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