Geely plans to double sales to turn Volvo around -WSJ

HONG KONG Tue Nov 10, 2009 10:35pm EST

HONG KONG Nov 11 (Reuters) - China's Zhejiang Geely Holding Group, vying to buy Ford Motor's (F.N) loss-making Volvo unit, has developed a turnaround plan under which it hopes to double Volvo's sales to near 1 million vehicles a year, media reported on Wednesday.

Under the plan, Geely would build a new Volvo plant in China with annual capacity of 300,000 vehicles a year to draw on China's market potential and inexpensive labour, the Wall Street Journal reported, quoting a source close to Geely.

Its Hong Kong listed unit, Geely Automobile Holdings Ltd (0175.HK), would also add two or three bigger, more luxurious cars to Volvo's lineup over the next three to four years, which it hopes would boost global sales, the source said.

But for now it is planning to cede more sophisticated engineering to Volvo's Swedish operations, an aspect of the plan that could help allay fears of lost jobs in Sweden.

Geely believes Volvo has the potential to sell 200,000 cars a year in China, up from 12,600 vehicles last year. It forecasts selling nearly 1 million cars a year globally within four or five years, compared with recent annual sales of around 400,000 vehicles.

However, Geely executives see a long slog to seal the deal roughly worth $2 billion, a process complicated by intellectual-property issues, according to the Journal report.

At issue, the source said, are what technology Ford would transfer to Geely, how Ford would continue to use Volvo technology and how the two companies would handle any possible disputes over technology down the road.

Last month, Ford officially named Geely Holding Group as preferred bidder for Volvo, in what could lead to the biggest overseas acquisition by China's fast growing auto sector. [ID:nLS682068] (Reporting by Alison Leung; Editing by Jonathan Hopfner)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

Track China's Leaders