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Geely says no plans to buy Ford's Volvo car unit

By Yu Liang (China Daily)
Updated: 2009-02-06 07:48

A model poses by a Geely's Panda at the Taizhou Auto Show in Zhejiang province, Dec 6, 2008.[Asianewsphoto]

China's largest privately owned carmaker Geely Automobile Holdings Ltd has denied reports that it is acquiring the Volvo car unit from Ford Motor Co, Reuters said yesterday.

It quoted a spokesperson from Geely as saying: "We don't have plans to buy Volvo as some media have reported."

Earlier media reports had said preliminary talks between Geely and Ford began in December after Ford said it would consider selling the unit.

Related readings:  Geely to add five new cars a year  Chinese automakers have more to show in Detroit  Geely Auto to unveil new safety technology  US auto sales hit 27-yr low, topped by China

It said Ford would likely get less than the $6.4 billion it paid for Volvo in 1999. The US automaker, which is eager to raise cash to avoid a federal bailout, has also approached Chery Automobile Co and Chongqing Changan Automobile Co.

Spokesmen of both Geely and Volvo did not answer calls to their mobile phones.

Li Chunbo, an analyst with CITIC Securities Co in Beijing, said when a Chinese enterprise attempts to acquire a foreign rival it has to consider how it will benefit from the deal and whether it is capable of dealing with the purchased unit.

"When you compare the market value of Geely and Volvo, you will ask how can Geely raise enough money to buy the European car brand," he said.

It would also be hard for Geely to manage such a foreign brand, said Li.

Car sales growth in China slowed to 7 percent in 2008, the lowest in a decade in the wake of the economic crisis. The central government, however, recently unveiled stimulus plans to boost the industry and stop the economy from slowing.

The Volvo S60 concept vehicle is seen during the North American International Auto Show in Detroit, Jan 13, 2009.[Xinhua]

Geely's sales in the country fell 1 percent last year. At the economic forum in Davos last month, Geely founder Li Shufu said sales would rise 25 percent this year partly helped by the government support plan.

Volvo also struggled as the global auto market declined, and its US sales fell 64 percent last year. Ford said Volvo had a pretax loss of $736 million in the fourth quarter.

Ford lost $14.6 billion last year and is trying to avoid asking for government loans to survive after US auto sales plunged to the lowest level in almost 27 years.

Last June, Ford Motor sold Jaguar and Land Rover to India's Tata Motors Ltd for $2.4 billion. It sold its Aston Martin luxury line for $931 million in May 2007 to a group of investors.