Chinese car maker Geely seals $1.8bn deal for Volvo

The Chinese carmaker Zhejiang Geely yesterday sealed a $1.8bn (£1.2bn) deal to buy Volvo from Ford, bringing nearly two years of talks to a close.

It is the biggest overseas acquisition by a Chinese auto company and underscores the country's arrival as a major force in the motor market.

Volvo, renowned for its vehicles' safety and popularity with families, will remain as a separate company with its own management based in Sweden, Geely said yesterday. Its chairman Li Shufu said the transaction represented "a milestone in the history of Geely".

Geely said it had secured all the necessary financing for the deal– of which $1.6bn (£1.07bn) will be paid in cash and a further $200m (£135m) in a note – but was open to a possible loan from the European Investment Bank. The Chinese carmaker has a turnover of just 16 per cent of Volvo' s and employs just over half its target's workforce. Geely, which first approached Ford in 2008, was in 2009 named the preferred bidder for loss-making Volvo by America's number-two maker, which has been divesting subsidiary brands to focus on its core offering. Britain's Jaguar and Land Rover have already been sold as part of the programme to India's Tata Motors.

The US car giant originally paid $6.5bn (£4.4bn) for Volvo in 1999. "We think it's a fair price for a good business," Ford Motor's Chief Financial Officer Lewis Booth said.

Geely is already planning a factory in Beijing which will make 300,000 Volvo branded cars – as many Volvos for China as are now made abroad. In response to questions over Geely's plans for production in Europe, however, Mr Li said it was important for Volvo to stay close to key supply centres. "I have a deep belief that the manufacturing footprint in Gothenburg and Belgium will be preserved in the longer term," he said. Volvo's unions, initially unhappy about the prospects of a deal and a lack of information, have now backed Geely's takeover.

China passed the US to become the world's top car market last year.