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Volvo needs partners, China

2010-08-19 09:28

Stefan Jacoby on Wednesday hosted his first media conference as the new CEO of Volvo Cars.

Gothenburg, Sweden - Volvo Cars, owned by Chinese group Geely Automobile  may look to co-operate with rivals to gain economies of scale, addressing concerns about the cost of developing new models.

The Swedish carmaker's new chief executive, Stefan Jacoby, also told his first news conference in the role that Volvo's size could work to its advantage, making its nimbler than competitors.

"We have advantages, and we have to look at smart, intelligent solutions to overcome the obvious disadvantages with not having this kind of scale of economics," Jacoby said.

"There are opportunities to co-operate with suppliers, with maybe other competitors as well, but also, of course, to find synergies with our sister company Geely in the future."

Zhejiang Geely, parent of Hong Kong-listed Geely completed the purchase of Swedish carmaker Volvo from U.S. parent Ford Motor Co earlier this month, paying $1.3 billion in cash and issuing Ford a $200 million note.

Cost of development

Analysts have questioned whether smaller brands such as Volvo, whose sales fell to 334 808 cars last year from a record 458 323 units in 2007, can pay for the cost of product development in the fast-paced sector.

Jacoby, a former North American executive of German carmaker Volkswagen, is looking to return Volvo to a full-year profit for the first time since 2005. It posted a $653 million pretax loss last year.

The German, who assumed his new position at Volvo this week, declined to provide guidance on earnings and sales though he noted the brand had generated a profit in its final two quarters under the Ford umbrella.

Jacoby, whose time at Volkswagen also saw him hold positions in Asia, will look to broaden Volvo's footprint in China which overtook the United States as the world's biggest car market last year.

Geely's plan includes using the Swedish nameplate to produce luxury brands in China and nearly double Volvo's annual global production while maintaining its operations in Europe to supply the international market.

Geely has also said it is prepared to pump up to $900 million in capital into Volvo on top of what it paid Ford.

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