Geely may need $1.4 bln to revive Volvo after Ford deal

Zhejiang Geely Holding Group Co. may have to spend at least 10 billion kronor ($1.4 billion) to revive Volvo Cars after buying the Swedish brand from Ford Motor Co., Volvo union officials and board members said.

The figure would be "an absolute minimum" for financing car development, marketing, production and distribution in the next year, and the money needed could be double that amount, Glenn Magnusson, head of the managers' union at Gothenburg, Sweden-based Volvo, said in an interview.

Ford and Geely will probably sign a purchase agreement on the estimated $2 billion transaction toward the end of the month, according to three people familiar with the talks. Four unions said Feb. 5 that they would accept Geely as the new owner of Volvo as long as the Chinese manufacturer proves it can fund operations.

"We still want them to show us that they have the financial strength," Magnusson said yesterday by telephone. "We haven't seen anything yet and we are not satisfied."

Anders Fogel, a partner at Brunswick Group in Stockholm who acts as Geely's spokesman, said talks are proceeding according to plan, and that the carmakers are sticking to a target of reaching an accord by the end of March.

Ford is "still working toward a definitive agreement by the end of the first quarter and to close the sale by the end of the second," said Mark Truby, a spokesman at the Dearborn, Michigan-based company.

Provincial Governments

Regulatory approvals would come after any signing, followed by a transfer of ownership by June 30, two of the people said, speaking on condition they not be identified because the talks aren't public.

Geely has received funding in the past few days to cover the purchase price from a combination of Chinese financial institutions, underwritten by provincial governments, one of the people said, declining to specify any amount the manufacturer is providing. The Chinese automaker told Ford in December that it had enough funds to operate Volvo as a sustainable business, the person said.