China's Chery Auto eyes European brands: source

By Fang Yan

SHANGHAI (Reuters) - Chinese car maker Chery Automobile has held talks with several European auto brands, including Ford Motor's (F.N) Volvo car brand, and is interested in an acquisition, a source with direct knowledge of the matter said on Friday.

"Chery has been in touch with several European auto brands, including Volvo," the source told Reuters.

"The company might be making some big moves in 2009," added the source, who declined to be identified due to the sensitivity of the matter.

Dearborn, Michigan-based Ford, considered the best-positioned of the embattled U.S. automakers, lost a record $14.6 billion last year. It has been seeking to raise funds to avoid a federal government bailout amid a severe downturn of the world's largest auto market.

Ford had also approached Chongqing Changan Automobile group (000625.SZ), currently producing the Volvo S40 sedan in a three-way tie-up with the Detroit automaker and Mazda Motor (7261.T).

A Chery spokesman told Reuters that the current global industry slump, especially in the developed markets, presents a rare opportunity for Chinese car makers to raise their profile, but he declined to give details.

"What I can say is that we will not throw away these opportunities," the executive said.

Changan Auto and Ford's spokesman at its China operations declined to comment.

UP FOR SALE

General Motors GM.N, which has until next Tuesday to convince the U.S. Congress of its viability in order to keep $13.4 billion in federal loans, has also been seeking buyers for its Hummer SUV line, the Swedish brand Saab and a medium-duty truck business based in Flint, Michigan.

"Volvo is the most solid brand compared with other brands the Detroit automakers have put up for sale," said Yankun Hou, industry analyst with Nomura International.

"The price tag could be too high, but it could be a big help for Chinese automakers who lack core technology but seek to climb up the ladder."

Ford paid $6.4 billion for the Volvo brand in 1999, but analysts say it is unclear how much it will ask for the unit, which posted a loss of $736 million on a pre-tax basis in the fourth quarter, down from a break-even position a year earlier.

Chery, China's biggest national car brand, is among a growing rank of local players, including SAIC Motor (600104.SS), hoping to emulate the global success of their Asian rivals eventually.

The automaker has already exported its self-developed cars to more than 50 countries, mostly in the developing world, and has been seeking to tap mature markets.