Volvo Cars' Chinese strategy will center on Chengdu plant, Peltonen says

Volvo Cars, the Swedish carmaker acquired by Zhejiang Geely Holding Group Co., is leaning toward starting production in the Chinese city of Chengdu to boost sales in the country, according to a Volvo board member.

The board agreed at a meeting in Gothenburg yesterday that taking over an existing Geely Automobile Holdings Ltd. factory in the southwestern city and converting it to produce Volvo cars would be the cornerstone of Volvo’s China strategy, said Marko Peltonen, who represents the IF Metall union on the board. No decision has been taken, he said.

“To have a Volvo factory in Chengdu is the main track,” Peltonen said by telephone late yesterday. “It wouldn’t be a mixed factory, it would only be a Volvo factory.”

Zhejiang Geely bought Volvo from Ford Motor Co. in August for about $1.5 billion. Expanding in China is key to Volvo’s goal of doubling sales to 800,000 cars in 10 years, Chief Executive Officer Stefan Jacoby has said. Jacoby said in October that Volvo may need as many as three plants in China.

The board yesterday also appointed Jan Gurander as chief financial officer starting latest in April, Volvo said in a statement today. Gurander is currently CFO at MAN Diesel & Turbo SE. Hans Oscarsson will continue as acting CFO until Gurander takes over, Volvo said.

Volvo also said Lex Kerssemakers, currently head of Volvo Cars Overseas Corp., will become head of product strategy and vehicle line management, a new function. The position will give him ”a key role in the development of the next generation of cars from Volvo,” the company said in the statement.

Chengdu Plant

Peltonen said Volvo hasn’t set a timeframe for a decision on the Chengdu plant. “Decisions also have to be made by local Chinese governments,” he said, adding that he doesn’t know if the existing Geely production at the factory would be moved elsewhere.

Geely plans to produce the Volvo S60 at an existing plant in Chengdu, China, An Conghui, vice president of Geely Automobile, the group’s Hong Kong-listed unit, said Aug. 19. In the future, the company will also build Volvo models at a new plant in Chengdu, he said. Yuan Xiaoling, a spokesman for Zhejiang Geely, declined to comment.

“We have a common and undivided focus to create a sustainable plan for Volvo Cars’ way forward in China,” Li Shufu, chairman of Volvo and Geely, said in today’s statement. “This plan will be based on thorough analysis of which models to build in China and which to import, anticipated volumes and the local production capacity to deliver these cars.”

Booming Auto Sales

Sales of passenger cars including multipurpose and sport- utility vehicles in China surged 29 percent in November to 1.34 million, higher than the previous monthly record of 1.32 million in January, the China Automobile Industry Association said yesterday. The pace of growth was the fastest since April.

China’s position as the world’s largest auto market, along with its booming luxury sector, makes it a market carmakers such as Volvo cannot ignore, said Ashvin Chotai, a London-based managing director of Intelligence Automotive Asia, an industry consultant.

“In Volvo’s case, it is now under Chinese ownership and there’ll be a special effort to get its operations in terms of sales and marketing, production operations, product development activities for the Chinese market going in a very speedy manner,” Chotai said in a phone interview.