Geely plans fancier models in China with Volvo deal

China's Zhejiang Geely Holding Group Co., chosen last month as lead bidder for Ford Motor Co.'s Volvo unit, has developed a turnaround plan in which the money-losing Swedish auto maker would sell nearly one million vehicles a year. The plan centers on China but also sets ambitious goals for Volvo's traditional markets of Europe and North America.

Geely executives see a long slog to seal the deal, however, a process complicated by intellectual-property issues, according to a person close to Geely.

The person confirmed that Geely, one of China's biggest privately owned auto makers, is financing a roughly $2 billon bid for Volvo with a combination of cash, bank loans and funds from a small number of investors. He said those investors include a government-owned fund based in Tianjin, China, and a relatively well-known foreign investor. The person didn't give details.

Under its plans for Volvo, Geely would build a new Volvo plant in China capable of producing 300,000 vehicles a year as it looks to draw on China's market potential and inexpensive labor to raise sales and cut costs. But for now it is ceding more sophisticated engineering to Volvo's Swedish operations, an aspect of the plan that could help allay fears of lost jobs in Sweden.

Geely believes Volvo has the potential to sell 200,000 cars a year in China, up from 12,600 vehicles last year. It forecasts selling nearly one million cars a year globally within four or five years, compared with recent annual sales of about 400,000 vehicles. Geely wants to use Volvo's manufacturing capacity fully in Europe to sell 600,000 vehicles there and in North America.

Geely, whose Geely Automobile Holdings Ltd. unit lists shares in Hong Kong, also would add two or three bigger, more luxurious cars to Volvo's lineup over the next three to four years, which it hopes would boost global sales, the person said.

"Time and again Geely has accomplished what others said was not possible," said Michael Dunne, an independent auto analyst. "But to boost sales in North America and Europe to 600,000, Geely is going to have to find a way to take a company that is losing money and market share in mature markets and turn it completely around. That would require a stroke of genius."

First, of course, Geely has to seal the deal.