Geely will need at least $1.4 billion to overhaul Volvo

Article by Christian A., on August 25, 2010

For a successful overhaul, Geely will require at least $1.4 billion once the deal to buy Volvo from Ford is finalized, according to Volvo's board members and union officials. The Chinese carmaker is believed to already have secured financing for the deal but it is likely that it would need another $1.4 billion to finance car development, production, marketing, and distribution.

In an interview with Bloomberg, Glenn Magnusson, head of the managers' union at Volvo, said that this number is "an absolute minimum." He added that the union wants to see Geely show that it has "the financial strength" but so far, it hasn't done that yet.

This is supported by Volvo board member Magnus Sundemo who said that Geely's investment in Volvo's operations will have to be at least as much as the purchase amount. The reason for the high investment is Geely's plan for expansion in China.

Currently, Volvo produces a variation of its S80 in the country, Geely wants to assemble up to 200,000 cars in China.

It also aims to bring back Volvo to profitability next year, which Volvo has not been able to do so since 2005, when it recorded a pretax profit of $377 million. However, Geely is adamant that it possesses sufficient on hand to operate Volvo as a sustainable business.

Topics: volvo, geely

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