Oct. 30 (Bloomberg) -- Volkswagen AG, Europe’s biggest automaker, is considering a purchase of assets from Wilhelm Karmann GmbH instead of a complete takeover of the insolvent car manufacturer, three people familiar with the situation said.

Volkswagen may buy Karmann’s German premises including assembly halls, manufacturing facilities and a paint shop in Osnabrueck about 170 kilometers (106 miles) west of the VW headquarters in Wolfsburg, said the people, who declined to be identified because the talks are confidential.

Volkswagen negotiators requested Oct. 28 financial documents on Karmann’s assets and explained that interest has shifted away from a fully-fledged takeover, two of the people said. Talks have been held up by differences in the purchasing price with a proposed 20 million-euro ($29.6 million) offer from VW falling short of what Karmann is seeking, the people said.

“The whole rescue is a showpiece of state industrial policy,” Horst Schneider, an HSBC Holdings Plc analyst in Dusseldorf, Germany, said by telephone. “Volkswagen is stepping in to save Karmann.”

VW is helping Karmann in order to return a favor to Lower Saxony, according to Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg- Essen. Both companies are based in the state, which as VW’s largest investor prevented a takeover by Porsche SE this year.

Bankruptcy Filing

Karmann filed for bankruptcy protection in April as the worst slump in automotive markets for decades left the manufacturer, known for the Karmann Ghia sports car built on a VW Beetle chassis from 1955 to 1974, unable to pay workers. Karmann has 1,600 employees at its Osnabrueck plant and 720 of them will be fired Nov. 1, according to the people.

Volkswagen’s supervisory board plans to discuss possible steps regarding Karmann at a special meeting on Nov. 11, the people said. That’s the day when liquidity at Karmann, which employs another 1,150 staff at foreign units unaffected by insolvency dealings, will dry up, one of the people said.

Michael Brendel, a Volkswagen spokesman, and Karmann’s Christian Eick declined to comment.

Karmann makes roof systems for models from Daimler AG’s Mercedes-Benz unit and Bayerische Motoren Werke AG. Besides the talks with VW on possible asset sales, Karmann is also in negotiations with Magna CTS GmbH, a Germany-based subsidiary of Canadian auto-parts maker Magna International Inc., and Spanish parts maker Cie Automotive SA about selling its roof technology, one of the people said.

BMW yesterday paid Karmann an unspecified amount to cover some of the outstanding bills, according to BMW spokesman Frank Wienstroth. He gave no further details.

“BMW’s payment is providing a little bit of relief but that’s not nearly enough” to continue insolvency proceedings, Pietro Nuvoloni, a spokesman for Ottmar Hermann, Karmann’s Frankfurt-based insolvency administrator, said today by phone.

To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net.

Last Updated: October 30, 2009 12:12 EDT