Volkswagen's China venture to acquire Fiat plant

By Fang Yan

SHANGHAI (Reuters) - The Shanghai car making venture owned by Volkswagen AG (VOWG.DE: Quote, Profile, Research) and SAIC Motor Corp (600104.SS: Quote, Profile, Research) has agreed to take over Fiat's former car making facility in east China, an SAIC executive said on Wednesday.

Shanghai Volkswagen will buy the facility from SAIC, which acquired it during last year's merger between SAIC and Nanjing Automobile, a Chinese partner of Fiat (FIA.MI: Quote, Profile, Research), SAIC president Chen Hong told Reuters.

The facility has suspended production but will resume operating in May, producing as many as 50,000 to 60,000 cars in 2008. Annual production capacity will rise to 150,000 cars in the next few years, Chen said.

He declined to say how much Shanghai Volkswagen would pay to acquire the facility. The venture's current annual capacity is 500,000 cars.

SAIC Motor, China's largest car maker, is also investing heavily to develop its own-brand cars. The own-brand car business generated 3 billion yuan ($429 million) in sales in 2007, Chen said, out of the firm's overall sales of 104.38 billion yuan.

In early 2007, SAIC Motor rolled out its first own-brand sedan, the Roewe 750, based on acquired technology. Later in the year, it merged with smaller rival Nanjing Automobile, which had previously acquired failed British car maker MG Rover.

It aims to sell 16,000 MG cars this year, with sales of Roewe models rising to 45,000 from 16,500 in 2007, Chen said.

He added that he expects SAIC to break even on its own-brand car business this year if it can reach its annual sales target of 8 billion yuan.