Volkswagen is buying land, machinery and equipment from insolvent contract car manufacturer Karmann.

VW plans to set up a new group manufacturing subsidiary in Osnabruck, Karmann's hometown.

It will become home to a new niche vehicle project from 2011.

Karmann has had long links with VW, including building several of its cabriolet models and using the VW Beetle as the basis of its own Karmann Ghia coupe.