Chairman of Chinese car maker moves to quell concerns
27 April 2010

Geely will invest £586m of operating capital into Volvo when its purchase is complete, its chairman has announced.

Geely chairman Li Shufu made the announcement at the Beijing motor show, in a bid to dispel concerns that Volvo's position as a premium car maker would be diluted by its association with Geely, which is best-known as a low-cost car maker.

"After the takeover, Geely and Volvo are brothers instead of a father and son," said Shufu. "Geely will not produce Volvo cars. Volvo will not make Geely cars."

Ford entered into a definitive agreement to sell Volvo and related assets to Zhejiang Geely Holding Group in a $1.8 billion deal ((£1.2bn) last month.

Following the agreement, the sale is expected to close in the third quarter of 2010, subject to approval from governments around the world.

Geely will own Volvo outright, with Ford retaining no shareholding in the company. Ford paid £4.34bn for Volvo when it bought it in 1999, and Volvo has not made a profit for the company since 2005. Geely, founded in 1986, is China's tenth largest car maker.

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However, Ford will continue to supply Volvo with powertrains, stampings and other vehicle components for unspecified periods. As part of the sale, Ford also has committed to provide engineering support, information technology, access to tooling for common components, and other selected services for an unspecified transition period.

Ford and Geely have also established protocol agreements to govern the use of intellectual property; these agreements will also allow Volvo to grant sublicenses to certain portions of Ford’s intellectual property used by Volvo to third parties, including Geely. The IP deals are expected to last the length of Volvo's current product cycle.

All but $200 million - which will be paid at a later date - of the purchase price will be paid in cash. .

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