Electrification, a 5-passenger version and a diesel engine – at least for some markets – appear to be in the cards for Volkswagen’s new U.S.-built Atlas CUV, though the particulars surrounding those moves remain very much up for debate, says a top engineer at the German automaker.

The Atlas, unveiled late last month in Santa Monica, CA, is the most important new-model launch for the Volkswagen brand in the U.S. since it rejiggered its Passat midsize sedan to better suit American tastes.

Like the U.S.-market Passat, the new Atlas will be built beginning in December at VW’s Chattanooga, TN, assembly plant, where VW also is adding engineering capacity in order to develop vehicles more attuned to American tastes and expand local content to cut costs.

The investment in Tennessee is part of a $7 billion outlay for North America that also will see production of a long-wheelbase 2-row Tiguan – better sized for the U.S. market – at VW’s Puebla, Mexico, plant.

The expansion comes as VW reorganizes its U.S., Canada and Mexico operations into a single entity for the North American region that will play a greater role in product development and other strategies for the parent company in Germany.

The Atlas, sized almost inch-for-inch with the Ford Explorer, is based on VW’s MQB architecture, shared with the Golf, Beetle and Jetta. It will offer 3-row seating for seven and is powered by a standard Mexican-built 238-hp 2.0L TFSI gasoline 4-cyl. or optional 280-hp 3.6L gasoline V-6 imported from Germany, both mated to an 8-speed automatic transmission.

But the Atlas and the upsized Tiguan on the way are just the first volleys in VW’s effort to fill whitespace in its CUV lineup, with much more to come.

In a wide-ranging interview, Matthias Erb, chief engineering officer for VW in North America and head of its Engineering and Planning Center in Chattanooga, discusses Atlas’ development, what’s next and how VW is reshaping its North American operations in the image of its key Japanese competitors. Following is an edited transcript:

WardsAuto: One of the advantages of MQB is you can swap powertrains, you can use electrification, even package in a fuel cell. Does that ability remain with the Atlas?

Erb: Yeah, exactly. When you look at the MQB toolkit, you have some things that (can be) redefined. You can be sure that all the powertrains fit into the car in terms of packaging. So for example, if you decide to build a hybrid version, you’ve already made sure that the car is ready to also get a kind of hybrid powertrain, so that in terms of packaging, the powertrain fits into the car.

WardsAuto: You showed a plug-in hybrid version of the CrossBlue concept (that foretold the Atlas) in Detroit in January. Is that still the plan, to offer a plug-in down the road?

Erb: This is a thing we are still discussing. At the moment, the plug-in is not so very attractive to us because of the upstream emissions (carbon dioxide produced in generating electricity). If you have a plug-in, in our case, (it equates to) almost 50g of CO2 (in upstream emissions).

We really don’t know how attractive those cars are anymore because the CO2 balance is not much better than the balance of (conventional) hybrid vehicles. So it is possible (there will be a plug-in Atlas), but this is a question of product strategy.

WardsAuto: So there will be some form of electrification, you’re just not sure whether it will be a conventional hybrid or plug-in?

Erb: Yes. You have the CO2 requirements and you have market requirements. And (we) are observing the markets for demand for electrified cars. We do have customers who are willing to pay for that. (But) we’re still working on whether that would be an Atlas-type of car or whether more of a passenger car with a hybrid system. This is open. We have a certain strategy, and I can’t really talk about that, but we’re still considering where (in the model lineup) to electrify and where not to electrify so much.