Sweden: Geely to retain European Volvo production

Friday, November 20, 2009, AutomotiveWorld.com

The first formal meetings between Geely and representatives of Ford, Volvo, Volvo unions and the Swedish government have been taking place this week.

Ford’s preferred bidder for Volvo has ambitious plans for the Volvo brand. It intends to increase Volvo’s global sales from around 400,000 units at present to one million units by 2014. This includes the launch of several new Volvo models. Building on Volvo’s premium status, Geely reportedly has plans to launch two or three larger, more luxurious Volvo-branded models.

Earlier this month, Geely confirmed that it intended to establish a new 300,000upa Volvo plant in China. Volvo cars are already built in China; the S40 and S80L are built at Chongqing by Chang'an Ford Mazda Automotive. During meetings this week it is understood that Geely has been assuring Ford and Volvo union representatives that its ambitious plans for Volvo manufacturing in China would not affect Volvo’s existing European manufacturing.

Whilst Ford appears confident that it can execute the sale and protect its IP rights – it has experience of this following the sale of Jaguar Land Rover to Tata – some concern has been expressed over Geely’s source of funding for the purchase of Volvo. No sale price has been named by either party, but Ford is unlikely to recoup much more than a third of the US$6.45bn it paid for Volvo a decade ago. This would nonetheless represent a significant sum for a small Chinese vehicle manufacturer. In September, it was reported that Geely planned to raise capital through a bond issue. As long ago as the beginning of the year, it had been feared that Geely would be unable to afford the acquisition of Volvo without the assistance of the Chinese government; Geely remaining silent over its source of funding has furthered suspicion that China’s largest private, independent vehicle manufacturer may be receiving state funding.

Published on Friday, November 20, 2009