Author: Gordon Platt

Investor: Company to watch

By Gordon Platt

Zhejiang Geely, China’s largest privately owned automaker, aims to nearly double Volvo’s annual global production if it succeeds in acquiring the Volvo Cars division of Ford Motor. The Chinese firm is expected to pay as much as $2 billion for Volvo, which Ford purchased in 1999 for $6.5 billion. Zhejiang Geely said last month that plans to purchase the Volvo brand were on track, although no agreement had yet been signed.


The Chinese carmaker plans to build a new factory in Beijing that would produce more than 300,000 Volvos a year for the Chinese and global markets.


Zhejiang Geely is confident it can turn the Swedish automaker profitable by 2011. The Chinese firm has vowed to keep Volvo as a relatively autonomous unit. It plans to maintain Volvo’s Swedish headquarters and product development operations in Gothenburg. It is eager, however, to have a Western brand to give China-made cars wider access to the global market.


Ford will continue making the Volvo S40 and S80 models through its three-way joint venture with Chongqing Changan Automobile and Japan-based Mazda Motor. Production will end when the contract between Ford and its joint venture partners expires.


Zhejiang Geely says financing for the Volvo transaction is already in place, but it may need to raise another $1.5 billion to support future vehicle development.


Known for its lower-end vehicles, Zhejiang Geely could face something of a culture shock in managing a premium global brand, analysts say.