Volkswagen plans to boost its ailing Spanish unit by by expanding its model range and growing outside its domestic market in a move chief executive officer James Muir described as “the last attempt for Seat as a brand”.

Muir told Bloomberg News: “It would not be sensible to view things differently. If one would want to get rid of Seat, one would have to give the other party money to take it.”

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The former Mazda Europe chief, who took over at Seat last September, said VW had a five-year plan to turn around the fortunes of the loss-making carmaker which has been losing customers to other brands.

Seat’s first-quarter operating loss of EUR110m (US$139m) was more than double VW’s two other unprofitable units, Bentley and commercial vehicles. Continued losses could scupper the German parent’s plan to become the world’s largest automaker by 2018.

Deliveries of Seat vehicles fell 8.5% to 337,000 units last year while Spanish car sales dropped 21% overall in 2009. The country’s once-booming economy started to contract in the second quarter of 2008 and has taken six months longer than other euro area countries to return to growth.

Muir said that Seat must increase its model range and reduce reliance on the Ibiza which accounts for 56% of its sales and re-stated VW’s goal of more than doubling the unit’s sales to 800,000 vehicles.

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VW reported in March that a comprehensive programme of cost cuts was under way to return Seat to profit after its 2009 operating losses quadrupled to EUR339m (US$430m).

Part of this is to move production of other VW Group vehicles to Seat’s plant at Martorell near Barcelona, starting with Audi’s new Q3 compact SUV from next year.

The plant has a capacity of 500,000 vehicles a year and will make 80,000 Audis. Utilisation is currently 60% and Muir said it needs to reach 90% to break even.

He added: “Our clear focus over the next three years will be to improve utilisation. One cannot solely rely on cost reductions to make Seat profitable.”