Continental AG, the German auto-parts maker being bought by a smaller competitor, forecasts a tenfold increase in North American sales for a division that makes interior components.

A new factory in San Luis Potosi, Mexico, will begin producing vinyl and "leatherette" coverings for seats, instrument panels and consoles next year, said Dirk Leiss, chairman of the executive board for Continental's Benecke-Kaliko Group.

That may help boost annual North American revenue for the division to $100 million in five years, from about $10 million last year.

Leiss said the money-losing U.S.-based auto companies could increase sales by making the insides of their vehicles match the feel and look of European automakers' products.

"To recover here in the U.S., automakers have to improve their interiors," Leiss said in an interview in Detroit, where he announced the new plant Tuesday.

"It's difficult to grow in a declining market, but we see great opportunity."

The factory in Mexico will take on manufacturing for North America now being done in Germany, Leiss said.

Benecke-Kaliko provides interiors for luxury and near-luxury vehicles such as Bayerische Motoren Werke's BMW 5 series and General Motors Corp.'s Cadillac CTS sedan.

Continental, based in Hanover, received $3.57 billion, of its revenue, or 22 percent, from North America last year. Benecke-Kaliko is part of Continental's ContiTech AG division.

Schaeffler Group, the world's No. 2 maker of ball bearings, won control of Continental with a $17.9 billion bid Aug. 21.