Volvo secures $800 million loan from China Development Bank

Photo credit: BLOOMBERG

GOTHENBYRG, Sweden (Bloomberg) -- Volvo Cars, struggling to restore profits since Zhejiang Geely Holding Group Co. bought the manufacturer from Ford Motor Co. in 2010 for $1.8 billion, signed a second loan agreement with China Development Bank.

The $800 million credit with a maturity in 2021 will be used to further develop products and enhance the automaker's capital structure, Volvo Cars said.

The first drawdown of the loan is scheduled for this year, with amortization and terms that match those on a 2012 loan of 922 million euros ($1.25 billion), it said.

Volvo CEO Hakan Samuelsson said last week he is confident Volvo Cars will reach break-even this year after vehicle sales improved in the second half.

Volvo has to make up for a first-half loss stemming from declines in sales and pricing, increased investments and unfavorable currency exchange rates.

Under its new owner, Volvo Cars has laid out an ambitious growth plan to nearly double its sales to 800,000 vehicles by 2020. Deliveries will probably remain about unchanged this year from the 421,951 vehicles sold in 2012 and grow again next year, Samuelsson said last week.

Volvo Cars is developing its own vehicle platforms to gain full independence from former parent Ford by 2017.

Geely and Volvo Cars are also establishing a shared engineering center in Sweden to offer jointly developed vehicles by 2015.

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