Geely plans Beijing factory to double Volvo output

Shanghai, January 28 (Gasgoo.com) China's Zhejiang Geely Holdings Group is planning to build a Volvo plant in Beijing to nearly double the Swedish brand's annual global output to 300,000 cars, as part of its plan to pull Volvo out of the red by 2011, media said yesterday.

Zhejiang Geely, parent of Hong Kong-listed Geely Auto, will likely sign an initial agreement with Ford Motor early next month to buy the U.S. automaker's Volvo unit, and aims to complete the purchase of Volvo for less than $2 billion by June, according to industry sources.

Geely, China's largest privately-owned carmaker, plans to produce 300,000 Volvo branded cars at a new factory in Beijing, according to a Geely document seen by Reuters. Analysts said the 2011 break-even target could be a stretch for Geely, which has no experience running a foreign company.

However, strong government support could work to the company's favor, especially if the government puts Volvo on its list of approved brands for official purchasing. Such status has helped Volkswagen's Audi become one of China's best selling luxury brands.

In China, Ford currently runs a car venture with Chongqing Changan Auto to make Volvo S40 and S80 cars. Geely has reportedly approached Chongqing municipality about continuing the Volvo production in the city while planning to build a new Volvo plant in Beijing.

Geely plans to take over Changan's Volvo production lines and also partner with other Chinese companies, which would invest in a Volvo plant in Chongqing jointly with Geely.