$1.8bn Volvo deal gives China key role in auto industry
CHINESE car maker Zhejiang Geely agreed yesterday to buy Volvo for $1.8bn (€1.34bn), the biggest ever purchase of a car maker by a Chinese company.
The takeover underscores China's arrival as a major force in the global car industry and ends nearly two years of talks over Volvo, the last sale from Ford's former group of expensive cars, which also included Aston Martin, Jaguar and Land Rover. Geely said in a statement it had secured all the necessary financing to complete the deal and "significant working capital" to fund Volvo's business.
"Today represents a milestone in the history of Geely," Geely chairman Li Shufu told a news conference, adding that Volvo Cars would remain a separate company.
The deal, which both sides aim to close in the autumn, will free up cash for Ford and enable it to focus on its core brand.
Geely, parent of Geely Automobile Holdings, was named by Ford as the preferred bidder for its loss-making Swedish unit in October 2009.
The Chinese carmaker, which clinched Volvo at a price tag well below the $6.5bn Ford paid for it in 1999, plans to keep the brand and operations in Sweden. However, Geely chairman Li Shufu is planning a factory in Beijing which will make 300,000 Volvo branded cars, or as many Volvos for China as are now made abroad for foreigners.
Made-in-China Volvo may also get a boost from Beijing's plan to support domestic brands and replace Volkswagen's Audi A6 as Chinese state officials' car of choice.
China raced past the United States to become the world's top car market last year, with sales surging 46pc to a record 13.6 million units.
It is keen to move into Western markets but has so far lacked the technology and brand recognition to do so.
The Volvo deal should help the Chinese carmaker to get around some of those obstacles.