Manufacturing News

Volvo needs to get out of the red before opening China plants: Geely chairman

Emphasizing that Geely and Volvo are two independent companies though they will soon share the same owner, Li Shufu, chairman of Geely Holding Co. said at the Auto China 2010 show in Beijing that there will be no Volvo plant in China before turning the car brand's losses into gains after the takeover.

Reports had said Geely would likely to set up its Chinese headquarters and a Volvo factory in Shanghai where Geely already has plants to produce its Maple brand cars and London black cabs. But Li refuted the rumor by saying the deal is not yet completed as the authorities are going over the transaction.

"At the moment Volvo doesn't belong to Geely since the deal is not finished and we haven't paid the money," said Li. "Decisions about Volvo will be announced only after the deal goes through," he said, admitting that the company is sounding out some Chinese cities for Volvo's future development.

Li said that even if the deal is given the green light, Geely will not open any Volvo plants in China unless it can turn the losses into profits. This target, which Li hopes could be reached by 2011, can be realized when Volvo sells 370,000 cars a year globally.

Volvo's future prospects are rosy as the company sold 10,000 units in the first three months of 2010 in China, a 134 percent increase year-on-year. It wants to almost double its sales in China, which is the world's largest vehicle market this year to about 40,000 units, according to Alexander Klose, president of Volvo Cars China.

Geely signed a binding deal on March 28 to buy the Volvo Cars unit from Ford Motor for $1.8 billion. The acquisition is deemed as a win-win deal as Geely can help the Swedish brand open the biggest vehicle market in the world, while Volvo could boost Geely's technology capability and raise its brand recognition abroad.

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