VW says struggling to meet cost targets for budget car

By Andreas Cremer

GENEVA (Reuters) - Volkswagen's plan to enter the no-frills car market in developing countries is stalling because the German carmaker is struggling to meet cost targets for its first budget car, a VW brand executive told Reuters on Tuesday.

Europe's largest automaker has been trying for more than a year to hit internal cost requirements for the vehicle, which would likely sell for between 6,000 euros and 8,000 euros and be built in China, the biggest market for budget cars.

VW lacks a strong presence in markets such as India and Southeast Asia, with their growing small-car segments. A 2009 partnership with Suzuki Motor Corp (7269.T), designed to benefit from the Japanese manufacturer's leading position in India, fell apart in 2011 in a public squabble.

"It's becoming more and more difficult" to hit cost goals necessary to approve production of a budget car, VW brand development chief Heinz-Jakob Neusser said.

"It makes no sense to approve a vehicle that's not meeting our targets," he said, adding that VW would keep working on fulfilling the requirements.

To keep down assembly costs, VW has said it would use pre-existing mechanics from models that have gone out of production or are nearing the end of production, rather than develop new costly underpinnings for the budget car from scratch.

(Reporting by Andreas Cremer; Editing by Ludwig Burger and Mark Potter)