China's Zhejiang Geely Holdings will produce up to 300,000 Volvo cars a year at a new factory in Beijing as part of its plan to pull the Swedish brand out of the red by 2011, a source said today.
Zhejiang Geely, parent of Hong Kong-listed Geely Automobile, aims to complete the purchase of Ford's Volvo unit for up to $2 billion by May.
The addition of such capacity would nearly double Geely's current output, which reached 321,900 units in 2009 for the entire group, up 45% from a year earlier. Geely has set an ambitious annual sales target of 2 million cars by 2015.
Analysts said the 2011 break-even target could be a stretch for Geely, which has no experience running a foreign company.
Geely Automobile Holdings is China's largest private car maker. Its charismatic founder, Li Shu Fu, sometimes likened to Henry Ford, has shown global ambitions for Geely, which means 'lucky' in Chinese.
Ford, the only major US car maker to avoid bankruptcy last year, is selling its luxury Swedish brand to free up cash as it climbs out of the industry's worst ever downturn.
The purchase would be the biggest in a recent spate of similar acquisitions of distressed global assets by Chinese carmakers, which have thrived during the global downturn due to strong incentives for their industry under Beijing's 4 trillion yuan ($586 billion) stimulus plan.
Under the deal, Geely will keep the brand and operations in Sweden, including Volvo's headquarters, production facility and research centre, intact after the acquisition.
Among other deals involving Chinese vehicle makers, Sichuan Tengzhong Heavy Industrial Machinery is in the process of buying GM's Hummer brand, though that deal has yet to close and GM said earlier this month it is still awaiting approval by Chinese regulators.
Last month, Beijing Automotive Industry Holding Corp sealed a deal to buy technology from GM's Saab unit for $200m, saying it would use the technology to launch an aggressive campaign to develop its brand both at home and overseas.
The buying spree comes as China zoomed past the US to become the world's largest car market last year. Vehicle sales in the country jumped 46% to a record 13.6 million units for the year, according to the China Association of Automobile Manufacturers, well above the 10.4 million cars and light trucks sold in the battered US market.
