Geely Pledges Major Volvo Capital Boost

Chinese car maker Zhejiang Geely Holding has vowed to pump an extra $900 million dollars into Volvo Cars on top of the $1.8 billion purchase price in a bid to revive the Swedish brand’s flagging fortunes.

Geely will spend $2.7 billion dollars taking over Volvo, which includes the
original price tag plus $900 million in working capital, Geely chairman Li Shufu told a news conference.

Half of the funding will come from Chinese sources while the rest will come from overseas, the company said.

Geely, one of China’s largest private carmakers, signed Sunday to buy Volvo from Ford Motor Co, ending a decade under the ownership of the US auto giant.

Li said Geely hopes to revive the up-market car brand by ramping up production and boosting sales.

“Volvo’s biggest problem is that its scale is too small,” Li told reporters after flying back from Sweden, where the deal was signed.

“Profits can only be realised after the scale is expanded to bring down per-unit costs.”

Geely plans to keep Volvo plants in Sweden and Belgium and is considering opening factories in China for the local market.

The two brands would remain separate, with Volvo and Geely each continuing to produce their own cars, Li said.

“Relations between Geely and Volvo in the future will be like brothers, not father and son,” Li said.

The deal, which Ford initially agreed to in December, includes agreements on intellectual property rights as well as supply and research and development arrangements between Volvo, Geely and Ford.

“Volvo as a top brand in the world has accumulated enormous technology know-how,” Geely vice-president Zhao Fuquan told the news briefing.

“It is a strong resource for Geely and we will learn as a student to improve ourselves.”

The deal had initially caused consternation among unions at Volvo, which employs around 22,000 people worldwide, including 16,000 in Sweden.

Unions originally opposed the deal on grounds that it was vague on expansion plans and possible layoffs amid fears Geely would not provide financing for daily operations or future investments.

But Li said Geely was ready to work with Volvo’s trade unions, describing them as an “important organisation”.

“We can’t regard trade union as a destructive force to company management,” he said.

“We should be open-minded to them and seriously listen to their ideas.”


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