The head of German car giant DaimlerChrysler AG was quoted on Saturday as saying he was close to securing a deal to build Mercedes cars in China, but a target for Chrysler to break even would be tough.

Chief Executive Juergen Schrempp told news magazine Der Spiegel he would sign an agreement with Beijing Automotive Industry Holding Company in China in coming days to produce luxury Mercedes cars as well as trucks.

But, in a transcript of an interview to be published on Monday, he also said Daimler's troublesome U.S. Chrysler unit still faced some tough challenges.

"We are still aiming to be lightly positive at Chrysler this year," he said. "But due to significant risks concerning a possibly more difficult competitive environment in the United States, this will be a tough bit of work."

Few analysts expect Chrysler to break even this year as it struggles in a fierce price war between the U.S. carmakers.

Schrempp also reiterated that the company planned to make an operating profit of about five billion euros ($5.4 billion) this year.

The company cut its profit guidance for the year in June from a previous target of beating the 5.8 billion euros profit it made in 2002.

On the China deal, Shrempp confirmed that DaimlerChrysler planned to build around 25,000 of its C and E class Mercedes cars per year in the medium term. Foreign auto makers need to have local joint venture partners in order to build cars in China.

A spokesman for the company said Schrempp was on his way to China.

Foreign carmakers are pouring into China, the world's fastest growing car market as demand stagnates elsewhere, although some observers warn this may result in overcapacity.

In an interview with the local paper for DaimlerChrysler's Stuttgart headquarters, Mercedes chief Juergen Hubbert earlier said he expected no growth in unit sales next year.

He also said for the year to August, sales of Mercedes, Smart and Maybach cars had shrunk two percent, but gave no exact figures.

"We are planning for unit sales next year at around the level of this year," Huebbert told the Stuttgarter Zeitung. "This is linked to the generation change that is due for our smallest car, the A class, and our off-roader, the M-class."

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