Support grows for new Volvo owner
Hong Kong - Geely, China's No.1 private carmaker, said on Thursday that its parent company has strong support from the Chinese government to acquire Ford Motor's (F.N) Volvo unit, and expects robust growth for China's auto industry in 2010, also with help from Beijing.
"Without government support, the (Volvo) deal could not be done," Gui Shengyue, chief executive of Geely Auto, said at a media briefing in Hong Kong on New Year's Eve.
Last week, Ford said it was nearing an agreement to sell Volvo to Zhejiang Geely Holding Group, underscoring China's arrival as a major force in the global auto industry.
Gui said he believed Zhejiang Geely Holding Group, parent of Hong Kong-listed Geely Auto, had financial support for the acquisition of Volvo.
Reuters reported on December 1 that Geely was seeking at least $1 billion in loans to finance its $1.8 billion bid for Volvo, and that three major Chinese banks including one policy lender had agreed to offer the money.
Geely Auto would be looking for opportunities to participate in the Volvo project once the acquisition is closed, Gui said.
"The ultimate goal is to inject Volvo into the listed company," said Gui. However, he added that he could not predict when that goal would be realized.
Beijing loves you
Home-grown Geely, which means "lucky" in Chinese, is hungry for modern, innovative technologies from the Swedish brand to upgrade its car lineup and tap China's auto market, now the world's biggest.
Besides Beijing's support for Geely's Volvo acquisition, Geely also benefits from the Chinese government's subsidies policy, which will continue in 2010.
In early December, Beijing said it would subsidize sales of "green vehicles" in some cities as the Hu Jintao administration stepped up efforts to promote environmentally friendly vehicles to cut fuel emissions and boost domestic consumption - key to maintaining China's economic growth.
The government will also give rebates to Chinese private car buyers for the first time.
The global auto industry has changed dramatically during the past year's financial crisis. Global carmakers such as Volkswagen (VOWG.DE) and General Motors are stepping up their presence in China, which overtook the United States as the world's largest auto market this year.
Volkswagen said last month that it planned to more than triple its sales in southern China by 2018.
For their part, Chinese carmakers such as Geely and Beijing Automotive Industry Holding Group are jumping at the chance to pursue overseas acquisitions.
"The landscape of China's auto industry has gone through great changes and I think going overseas for acquisitions is a trend," said Gui.
To catch up with the tough competition and get Volvo working quickly after the acquisition, sources have told Reuters that Geely has already hired external consultants to advise on internal restructuring and integration for Volvo.
Some analysts have warned that brand recognition after the Volvo deal and the cultural gulf between Chinese and Western managers could challenge to Geely's goal to turn the Volvo deal into a long-term success.