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updated 12/8/2006 10:14:23 AM ET 2006-12-08T15:14:23

Wanxiang, China's largest car-parts maker and one of its most acquisitive companies, is in talks with Ford to buy assets from the U.S. carmaker's troubled components arm.

Lu Guanqiu, founder and chairman of Wanxiang, said the talks were part of a plan to expand the company's global presence. But he would not say which assets it was interested in or whether a deal was imminent.

Mr. Lu said Wanxiang had also been in preliminary discussions this year with Delphi, the former General Motors parts-maker that is in bankruptcy proceedings, but there had been no material results from the talks.

"We have seen that the quality of [Ford's] assets is all right, but because of high labor costs the business is not always profitable," Mr. Lu told the FT.

Wanxiang is understood to be interested in acquiring Ford's advanced design and production technology and in improving prospects for distribution of its own car parts in the US.

Any deal would probably face strong political opposition from unions fearing job losses and transfer of production to China.

Wanxiang's interest in Ford underlines an important shift in the car-parts industry. While analysts say it could take a decade for China's carmakers to become a global force, the country's components companies, which combine low labor costs and an improving reputation for quality, are flexing their muscles.

China's exports of car parts rose 75 per cent last year to $15.2 billion and were a further 38 per cent higher in the first two quarters of this year. Wanxiang supplies both Ford and GM.

The assets under discussion involve Automotive Components Holdings, a group of 17 plants and six other facilities that Ford took control of last year as part of the bail-out of Visteon, a parts maker spun off by Ford in 2000. Ford plans to sell or close all ACH facilities.

It has struggled to find buyers, but announced a tentative deal this week to sell a climate-control plant to Valeo, the French components supplier.

Mr. Lu began a tractor repair business in 1969 and moved into making parts for cars. The company had annual sales of $3.2 billion last year and hopes to export more than $1 billion of parts this year. His personal wealth is estimated at more than $1 billion and the company is one of the largest in China's growing private sector. Wanxiang set up an office near Chicago in the 1990s, headed by Mr. Lu's son-in-law.

An established North American parts maker would give Wanxiang a sales and distribution networks.

Ford declined to give details on its talks with the company.

Additional reporting by Bernard Simon in Toronto.

Copyright The Financial Times Ltd. All rights reserved.

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