Chinese automaker Zhejiang Geely Holding Group is partnering with Chinese regional asset manager Daqing State Asset Operation Company in its bid to acquire Ford Motor Company’s Volvo unit for a reported $1.8 billion.
According to a spokesman for Geely, the Daqing asset group will be a minority owner of the company. Geely’s acquisition of Swedish automaker Volvo Car Corporation will be the largest-ever purchase of a foreign auto company by a Chinese company.
Last February, Beijing quashed a deal that would have resulted in the sale of General Motors Company’s Hummer division to China-based Sichuan Tengzhong Heavy Industrial Machinery. GM subsequently decided to wind down the money-losing brand which it had been trying to sell since 2008.
Geely’s Swedish spokesman, Anders Fogel, said details concerning Daqing’s actual ownership stake in Volvo will not be made public until after the sale is completed. He said that Zhejiang Geely will retain a controlling shareholder position.
In March, Ford Motor Company signed the deal with Geely Automobile Holdings parent company, Zhejiang Geely Holding Company, for the sale of Volvo. The sale is seen as a watershed event in China’s emergence as a global powerhouse in the automotive industry.
Daqing State Asset Operations Company manages a number of state-owned assets in the northern region of Daqing. News of its possible involvement in the Volvo deal has led to speculation that the company’s new China production facilities will be located in the region. Geely has said it plans to build production facilities capable of churning out up to 300,000 units annually. At that capacity, the new China facilities would nearly equal Volvo’s total 2009 output.
Fogel declined to comment when asked whether or not Daqing’s involvement includes any provisions about where the new facilities will be located. He said, “This is a regional fund and they make investments in various cases that they believe in. This has been one of the interested parties we’ve talked to and they have felt it was interesting and see a big upside to the deal.”
Earlier this year, Geely Automobile said it would not seek outside financing to help with the purchase of the Swedish automaker.
Volvo has not posted a full-year profit since 2005. However, Ford said the company reported first quarter operating profit of $49 million.
Geely’s purchase of Volvo is expected to be finalized during the third quarter.
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