Volkswagen AG of Germany, Europe's largest automaker, is the favourite among four candidates to buy a majority stake in LDV Ltd of the UK, a source close to the British manufacturer told today.

"VW is the leading candidate," the source said. "Its operations would fit well with LDV's, but there have been discussions with three other potential partners. A deal may not be days away, but it could be weeks away."

The Independent, a daily newspaper in London, reported on October 2 that VW was close to buying a controlling stake in LDV.

The UK manufacturer is owned 50% by Daewoo Motor Polska Sp z oo (DMP), part of Daewoo Motor Co Ltd, the bankrupt Korean producer. LDV is held 25% by its employees and managers. The remaining 25% is owned by institutions 3i, Mercury Asset Management and Royal Bank of Scotland.

"VW likely would buy DMP's shares, but it may take equity beyond that - perhaps all of it," the source said. "The institutions may be looking to sell their stakes too."

If control of Daewoo changes, the board of LDV already has the right to buy back DMP's stake. But LDV is not waiting for Daewoo's future to be decided, as it plans in early 2001 to rollout a new model range developed with DMP, the source said.

"DMP has been willing to sell its stake in LDV," the source said. "It may need the cash, and it sees advantages in LDV being a strong partner."

The new models vary in gross weight from 2.0 tonnes to 3.5 tonnes: lighter versions are named BD100, heavier versions are named LD100. Both will be offered as drop-sides, minibuses, panel vans and pickups.

LDV and DMP will share 80% of the parts in making the new vehicles, but each company has capacity to produce all versions completely, so the British manufacturer would face no logistical complications under new owners, the source said.

US automaker General Motors Corp, widely seen as the only candidate to buy Daewoo, may view DMP and LDV as the most interesting operations of Daewoo in Europe, observers have said. But GM has not been among the parties holding serious talks with the British company, and LDV sees no reason to wait for the US automaker to determine its interest in Daewoo, the source said.

"LDV cannot wait for that to happen," he said. "The launch of the new products is getting too close, and LDV will want to be sure it can deliver these vehicles to markets smoothly. LDV has been looking for months for a strategic partner that can provide access to a worldwide distribution network for its products."

Read a related story about Daewoo and LDV here.