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March 31, 2010

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Home » Business » Auto

Volvo price tag now US$2.7b

ZHEJIANG Geely Holding Group said yesterday that a total of US$2.7 billion would be spent acquiring Volvo Car Corp.

The private auto maker signed an agreement with Ford to buy the Swedish unit for US$1.8 billion - the biggest ever overseas acquisition by a Chinese car maker.

Geely said during a news briefing in Beijing yesterday that an additional US$900 million will be for working capital to help turn around money-losing Volvo.

Half of the money was raised by Geely and domestic bankers with the remainder coming from investors in the United States, Europe and Hong Kong.

Geely Chairman Li Shufu said China's cheaper sourcing and engineering costs could significantly boost Volvo's global competitiveness.

"In future, with the support of two home markets, Volvo will be better able to deal with market ups and downs," he said.

Under the deal, Geely will own 100 percent of Volvo's cars, core technologies and intellectual property rights. It also gained rights to Volvo's safety and environmental technologies.

Despite questions on Geely's capability of handling an international brand, Li said Geely promised to keep developing Volvo in the premier car segment, adding its overseas plants and research teams will remain.

"Volvo is still small compared with Mercedes-Benz and BMW so expanding capacity is necessary," Li said, declining to provide details.

Geely, which won government support to buy Volvo, has reportedly secured land in suburban Beijing for a plant to produce 300,000 Volvo cars per year.

John Zeng, an auto analyst from auto consulting firm Global Insight, said Geely could improve Volvo's sales in China by securing government procurement.

The deal is expected to be completed in the third quarter of this year and still subject to government approval.




 

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