Geely tightens grip on London cab maker

09:10, March 19, 2010      

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Zhejiang Geely Holding Group Co, the Chinese carmaker seeking to buy Ford Motor Co's Volvo Cars, may take control of Manganese Bronze Holdings Plc, maker of the iconic London black cab, the UK-based company said.

Geely's Hong Kong-listed unit may raise its stake in the company to 51 percent from 19.9 percent by buying new shares at 70 pence apiece, Mark Fryer, Manganese's finance director, said. The Coventry, England-based automaker, which would raise about 14 million pounds ($21.5 million) from the share sale, will spearhead Geely's plans to sell its own saloon cars in Europe, he said.

"Our future will be both as a manufacturer of black cabs in Coventry, although more of the parts will be coming from China, and an assembler and distributor for Geely vehicles," Fryer said.

Zhejiang Geely declined to comment.

Manganese's LTI Vehicles unit and its predecessor companies have made cabs for the London market since 1948, according to LTI's website. Geely in early 2009 began manufacturing black cabs in Shanghai for the Asian market, as well as parts for the UK company's Coventry plant, under a joint-venture agreement.

Geely Automobile Holdings rose 4.16 percent to HK$4.17 on Thursday in Hong Kong trading. The shares have declined 1.7 percent this year.

"It is a reasonable move, but whether Geely can gain from the deal will depend on the sales volume," said Ricon Xia, an analyst at Daiwa Institute of Research in Hong Kong. "Geely has enough funds for the purchase, and by taking over a majority of shares, Geely will have more decision-making power."

In a statement on Thursday, Manganese said parts for its TX4 vehicles will be made in Shanghai, in a move that would eliminate about 60 jobs at its Coventry plant.

Ford Motor Co Chief Executive Officer Alan Mulally said talks to sell the automaker's Volvo unit to China's Zhejiang Geely Holding Group Co are proceeding.

"We are making progress on the negotiations," Mulally said, without giving a time frame for when the agreement will be made.

Dearborn, Michigan-based Ford put Volvo up for sale in late 2008, part of a strategy of dropping European luxury lines to concentrate on its namesake brand.

Spreading wings

Chinese Premier Wen Jiabao is encouraging companies in the world's third-largest economy to acquire technology and take on foreign rivals. Geely unveiled the Emgrand, its first homegrown model specifically designed for Western markets, in December and is seeking to use Manganese as its European distributor.

Shanghai-based SAIC Motor Corp paid $116 million for the design rights to MG Rover Group Ltd's Rover 25 and 75 cars in 2005 and became the owner of MG's plant in Birmingham, England, after a 2007 merger with Nanjing Automobile Group Corp.

Some previous attempts by Chinese automakers to expand overseas failed. Sichuan Tengzhong Heavy Industrial Machinery Co said in February its purchase of General Motors Co's Hummer brand was blocked by Chinese regulators as the gasoline-guzzling vehicles didn't fit the government's energy efficiency policy.

Geely and Manganese need to agree on a range of commercial issues, including warranty policies and translation of handbooks, before the deal can go ahead, Fryer said.

Source:China Daily
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