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VW drives overseas expansion as Europe hurts

Andreas Cremer and Jan Schwartz
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New VW Amarok is displayed at IAA commercial vehicles trade fair in Hanover

The new 'Amarok' vehicle is displayed at the Volkswagen exhibition area during a preview day at the IAA commercial vehicles trade fair in Hanover September 21, 2010. REUTERS/Christian Charisius

By Andreas Cremer and Jan Schwartz

FRANKFURT (Reuters) - Volkswagen is taking further steps to beef up its overseas operations as the German carmaker increasingly feels the pinch of slumping demand in ailing European markets.

VW, which sells about 60 percent of group vehicles outside its European home region, is already adding capacity in China and Mexico.

Group production chief Michael Macht told Reuters at the Frankfurt motor show on Wednesday that VW also plans to set up production in fast-growing Southeast Asian markets, closing one of the few remaining gaps in its huge global factory network encompassing 102 facilities.

"We will certainly become an active player in the region in the next years," Macht, who sits on VW's eight-member executive board, said in an interview. "We are currently very actively on the road in these countries."

Europe's biggest carmaker may announce later this year an initial 200 million-euro ($265.33 million) investment to build a car plant in Indonesia, an Indonesian government minister said last month, citing the location of Cikampek, West Java.

Macht declined to comment on which country VW would eventually pick and said decisions on brands and products have not been taken yet.

Carmakers across the world are relying on emerging markets for growth amid a protracted slump in recession-hit Europe where sales are hovering at a two-decade low.

The Wolfsburg-based multi-brand automotive group, which still lacks a vehicle-assembly plant in the Association of Southeast Asian Nations (ASEAN) group of countries, has a goal to overtake Toyota <7203.T> and General Motors to become the world's largest automaker no later than 2018.

The ASEAN group comprises Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Burma, Cambodia, Laos and Vietnam.

Separately, the German giant is considering a launch of commercial vehicles in the United States in future, as part of steps to expand its core namesake brand in the world's No. 2 auto market.

Commercial pickup trucks and vans such as VW's box-type Caddy model "certainly represent an opportunity" for the United States, Jonathan Browning, CEO of VW's U.S. operations told Reuters in a separate interview, referring to the success of Ford's Transit Connect van.

"There are preliminary discussions (with VW's Wolfsburg-based management) but no definitive plans at the moment," Browning said.

VW is seeking to boost its presence in the United States, eyeing 800,000 VW-brand and 200,000 Audi-brand sales by 2018, when it aims to snatch the global sales crown.

Still, Browning made clear that rather than adding to VW's offerings in the United States, the company would for now focus on maximizing the potential of volume-boosting models including the Jetta compact sedan, the Passat mid-size sedan and the Tiguan compact SUV.

"The immediate future is making the most of the vehicles we have plus the CrossBlue B-SUV," Browning said, referring to a seven-seat concept car VW presented at the Shanghai auto show this year.

"The European market may take years to fully regain its former strength," said Stefan Bratzel, head of the Center of Automotive Management think-tank near Cologne. "Overseas (car) markets will account for a large share of future growth."

(Editing by Mark Potter and David Evans)