China’s Zhejiang Geely Holding Group has revealed that it will finalize its deal to acquire the Swedish brand Volvo from Ford Motor Co. (F) by the end of this month.
Geely is eager to tap China’s high-growth auto market by acquiring modern, innovative technologies from the Swedish brand to upgrade its car lineup. The automaker expects a robust growth for China’s auto industry in 2010. In this situation, upgrading the product lineup would no doubt land the automaker in a favorable market position.
Geely is seeking about $1 billion in loans to finance the $1.8 billion deal. Three major Chinese banks — the Bank of China, China Construction Bank and Export-Import Bank of China — have agreed to extend the required funds to the Chinese automaker for the deal. Beside the financial support for the deal, Geely would also benefit from the Chinese government’s subsidy policy, which will continue in 2010.
In December last year, the Chinese government revealed that it would subsidize sales of “green vehicles” in some cities in an effort to promote environmentally friendly transport to lower fuel emissions and boost domestic consumption. The government will also offer rebates to Chinese private car buyers for the first time.
In 1999, Ford had acquired the Volvo Car Corporation from Sweden-based Volvo Group for $6.45 billion. However, the company had put up the unit for sale in December 2008 in an effort to cut costs and raise cash amidst plunging industry-wide auto sales.
Ford had discussions with many automakers to sell Volvo, including Renault SA, China’s third-largest automaker, Dongfeng Motor Group and fifth-largest automaker Beijing Automotive Industry Holding Corp (“BAIC”). However, in October 2008, the automaker disclosed that the preferred bidder for the unit was Geely.
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