FRANKFURT - Volkswagen's light commercial vehicles (LCV) unit warned the industry has not yet escaped last year's violent market downturn, the maker of the all new Amarok pickup said on Monday.

We know that 2010 will be another challenging year. The bottom has been reached in but not yet traversed, Volkswagen Commercial Vehicles Chief Executive Stephan Schaller said in a statement.

He added that an extensive facelift to the T5 transporter would help sales this year, as would the launch of the Amarok, VW's first pickup truck that will try to grab buyers away from the Nissan Navara and the Toyota Hilux.

The unit is expected to form a core pillar of a future commercial vehicle alliance, together with VW's Swedish heavy truck brand Scania and MAN, in which VW owns 30 percent.

Despite a recent management shakeup at MAN that left it without any clear frontrunner for the job of running all three businesses, Schaller's chances have diminished ever since a key steering committee member of VW's supervisory board openly questioned his qualifications.

Scania CEO Leif Ostling is widely expected to fulfill his current contract before retiring.

LCV's are arguably Europe's most profitable vehicles - they account for only 12 percent of the industry's unit sales but we believe they make margins of circa 10 percent, Bernstein analyst Max Warburton wrote to clients in October.

In a 120 page research report covering Europe's LCV market, he argued that an upturn this year would follow on the back of an improvement in the broader economy.

We expect a 2010 recovery thanks to recovering industrial activity and small business confidence plus potential LCV scrapping programs, Bernstein wrote in the study.

Last year's LCV sales at Volkswagen sank 20.7 percent to 354,770 vehicles, driven by collapsing demand for the T5 transporter model line and the larger Crafter delivery van.

Sales of the Caddy, the unit's smallest model in its product range, sank by just 7.7 percent to 151,488 vehicles, by comparison.

The downturn was cushioned to a degree by an increase in deliveries of the Caddy Life, since it could qualify for Germany's scrapping scheme as it is designed for private and not commercial use.

(Reporting by Christiaan Hetzner)