Lula's China trip to promote BYD takeover plan for Brazil Ford factory

SAO PAULO (Reuters) - Brazilian President Luiz Inacio Lula da Silva heads to China next week with plans to promote Chinese manufacturer BYD's takeover of a former Ford factory in northeast Brazil, according to sources with knowledge of the matter.

The deal hinges on a final agreement with Ford Motor Co, which still owns the plant in Bahia state despite halting production in Brazil in 2021, sources told Reuters.

In October, BYD signed a letter of intent with the Bahia government signaling plans to invest 3 billion reais ($570 million) to set up electric vehicle production in the Camaçari industrial park, outside the state capital Salvador.

Executives at BYD, which sells more electric cars than Tesla in Asia but lags behind in other regions, told Reuters in November that they hoped to reach a firm agreement on the Bahia plant by the end of 2022.

BYD and the Bahia government said talks are still underway. Ford declined to comment.

A Brazilian diplomat, who requested anonymity to discuss the matter, said Lula is eager to make a significant announcement about the factory during his trip. He broke into politics as a union organizer for autoworkers over four decades ago in Brazil, where Ford's plant closures stirred deindustrialization fears.

"For the Chinese it is important to set up in Bahia because even if they don't take advantage of the structure as much, they are Chinese replacing Americans," the diplomat said.

A source close to BYD said executives were determined to make the investment after visiting the Camaçari plant, which has capacity to make some 300,000 vehicles per year. However, their "hands are tied" until they reach a final deal with Ford, the source added.

Another source close to BYD said the negotiations are "in the final stages," working through "red tape" but with no major hurdles left.

($1 = 5.2870 reais)

(Reporting by Leticia Fucuchima and Lisandra Paraguassu; Additional reporting by Alberto Alerigi Jr.; Writing by Steven Grattan; Editing by Brad Haynes and Alistair Bell)