Can Geely revive Volvo?

09:54, March 31, 2010      

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Li Shufu, Geely's chairman, and his team yesterday held a press conference in Beijing, addressing public concerns about the intellectual property rights, financing, and the future of Volvo. "I cannot assure you that this deal will be successful, but Geely has full confidence," Li said.

What has Geely purchased?

According to the acquisition agreement, Geely will own 100 percent of Volvo Cars and its related assets.

Zhao Fuquan, vice chairman of Geely Group, said that Volvo, as an independent company, will hold the property rights of its key technology. In addition, Volvo will also govern the use of Ford-related intellectual property. "Geely Group will own 100 percent of Volvo Cars, and will own Volvo's key technology and intellectual property, as well as the use of massive intellectual property including 'zero injury, zero pollution' and new energy technology."

Where does the money come from?

"Geely has raised $1.8 billion for purchase Volvo Cars, and around $900 million of floating capital for Volvo's further business activities," said Geely's vice chairman Yin Daqing.

He noted that around half of the 2.7 billion U.S. dollars is from domestic sources and the other half is from foreign institutions. However, he declined to give detailed sources of the funds or Geely's financing channels.

How to make Volvo profitable?

"Volvo's relatively small scale led to its lack of strong competitiveness and vitality." Geely's chairman Li Shufu said.

Li pointed out that Volvo's sales were only one third of those of BMW and Benz's, while its research and development spending was comparable with that of the two luxury car giants.

"After it grows larger, the costs will drop and the profits will come out," said Li, adding that all the global auto markers that have good performance have successful home markets. After finalizing the deal, Volvo will have two home markets: Sweden and China.

"Low purchasing costs in China will also help to improve Volvo's competitiveness."

By People's Daily Online
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