20100328
SABC

Zhejiang Geely Holding Group, China's largest private-run car maker, agreed today to buy Ford Motor's Volvo car unit for $1.8 billion, the country's biggest overseas auto purchase. The takeover underscores China's arrival as a major force in the global auto industry and ends nearly two years of talks with Geely over Volvo -- the last sale from Ford's former premier group, which also held Aston Martin, Jaguar and Land Rover.

Geely said in a statement it had secured all the necessary financing to complete the deal and "significant working capital" to fund Volvo's business. "Today represents a milestone in the history of Geely," Geely chairperson Li Shufu told a news conference, adding that Volvo Cars would remain a separate company with its own management team based in Sweden.

The deal, which both sides aim to close in the third quarter, will free up cash for the number two US automaker and enable it to focus on its core Ford brand. Geely, parent of Geely Automobile Holdings, was named by Ford as the preferred bidder for its loss-making Swedish unit in October 2009.

The Chinese carmaker, which clinched Volvo at a price tag well below the $6.5 billion Ford paid for it in 1999, plans to keep the brand and operations in Sweden. Geely chairman Li Shufu is already planning a factory in Beijing which will make 300 000 Volvo branded cars, or as many Volvos for China as are now made abroad for foreigners.

Made-in-China Volvo may also get a boost from Beijing's plan to support domestic brands and replace Volkswagen AG's Audi A6 as Chinese state officials' car of choice. China raced past the United States to become the world's top auto market last year, with sales surging 46% to a record 13.6 million units. It is keen to move into Western markets but has so far lacked the technology and brand recognition to do so.

The Volvo deal should help the Chinese carmaker to get around some of those obstacles more quickly.