Geely to double Volvo output
By Huang Yuntao and Jacqueline Wong |
January 27, 2010, Wednesday
|
Print Edition
Print Edition
CHINA'S Geely Zhejiang Holdings will nearly double Volvo's annual global production with a new factory in Beijing as part of its plan to pull the Swedish auto maker out of the red by 2011, a source said yesterday.
Zhejiang Geely, parent of Hong Kong-listed Geely Automobile, aims to complete the purchase of Ford's Volvo unit for up to US$2 billion by May, according to an industry source who obtained a copy of the plan but wasn't authorized to talk about it publicly.
Geely, China's largest privately-owned car maker, plans to produce 300,000 Volvo branded cars at a new factory in Beijing, according to the document seen by Reuters.
Analysts said the 2011 break-even target could be a stretch for Geely, which under its founder Li Shufu has outlined ambitious global goals but has no experience running a foreign company.
"I think it's optimistic to break even next year as it needs to build a plant first and it might take time for Chinese buyers to accept a made-in-China Volvo," said John Zeng, an analyst with IHS Global Insight. "It will break even eventually but that's going to take time."
But he added that strong government support could work to the company's favor, especially if the government puts Volvo on its list of approved brands for official purchasing. Such status has helped Volkswagen's Audi become one of China's best selling luxury brands.
The deal would see Geely acquire Volvo for US$1.5 billion to US$2 billion, with an expected closing date in May after the signing of the initial agreement next month, according to a copy of the Geely document.
Geely, which means "lucky" in Chinese, said in December that it was near such a deal, and later added it had strong support from the Chinese government for the purchase.
Geely declined to comment.
The purchase would be the biggest in a recent spate of similar acquisitions of distressed global assets by Chinese car makers.
Zhejiang Geely, parent of Hong Kong-listed Geely Automobile, aims to complete the purchase of Ford's Volvo unit for up to US$2 billion by May, according to an industry source who obtained a copy of the plan but wasn't authorized to talk about it publicly.
Geely, China's largest privately-owned car maker, plans to produce 300,000 Volvo branded cars at a new factory in Beijing, according to the document seen by Reuters.
Analysts said the 2011 break-even target could be a stretch for Geely, which under its founder Li Shufu has outlined ambitious global goals but has no experience running a foreign company.
"I think it's optimistic to break even next year as it needs to build a plant first and it might take time for Chinese buyers to accept a made-in-China Volvo," said John Zeng, an analyst with IHS Global Insight. "It will break even eventually but that's going to take time."
But he added that strong government support could work to the company's favor, especially if the government puts Volvo on its list of approved brands for official purchasing. Such status has helped Volkswagen's Audi become one of China's best selling luxury brands.
The deal would see Geely acquire Volvo for US$1.5 billion to US$2 billion, with an expected closing date in May after the signing of the initial agreement next month, according to a copy of the Geely document.
Geely, which means "lucky" in Chinese, said in December that it was near such a deal, and later added it had strong support from the Chinese government for the purchase.
Geely declined to comment.
The purchase would be the biggest in a recent spate of similar acquisitions of distressed global assets by Chinese car makers.
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