Volvo is a tiger that needs to be freed, says Li Shufu, whose Zhejiang Geely Holding Group signed an agreement on Sunday to buy Volvo from Ford Motor Co.
“A tiger belongs to the forest. It belongs to the wild world and not confined in a zoo. We need to liberate this tiger,” Li told a press conference announcing the deal in Volvo's home town of Gothenburg.
Li was referring to Volvo's reliance on Europe for production and on Europe and North America for most of its sales. To address this issue, Li is planning a factory in Beijing that will make 300,000 Volvo cars a year. That is about the same amount the automaker produces annually at its plants in Sweden and Belgium.
He called the European factories the “heart” of the Volvo tiger, “but its power should project it throughout the world,” he added.
“I see China as one of the markets where Volvo could show us it has the opportunity to liberate itself and show the potential that is has. That is the rational for the deal,” Li said. “We want to stabilize the brand in the traditional markets of Europe and North America and, at the same time, develop our business in emerging markets including China.”
Despite the company's intensified focus on China, Li said any production facility opened in the country would be to support rather than replace the factories in Sweden and Belgium.
The Geely chairman's comments came after his company agreed to pay Ford $1.8 billion for Volvo, China's biggest overseas auto purchase.
Geely will pay Ford $1.78 billion in cash and the remaining $200 million in a note to get full control of Volvo, including its intellectual property.
Geely, parent of Geely Automobile Holdings, was named by Ford as the preferred bidder for its money-losing Swedish brand in October 2009.
Ford CFO Lewis Booth said No. 2 U.S. automaker is happy with the deal.
“We think it is a fair price for a good business,” he said.
In 1999, Ford paid $6.4 billion for Volvo.
Ford and Geely aim to finalize the deal in the third quarter.
If that happens, it will be the second time this year that a Swedish automaker changes owners.
In February, Dutch niche car maker Spyker Cars NV closed a deal to buy Saab from General Motors Co. for $74 million in cash and $326 million in preferred shares.