To tell the truth, I never expected Geely to actually pull off its bid for Volvo. The whole process seemed to me to be one giant marketing exercise for Geely’s brand, rather than a considered and calculated acquisition.
There are still big question marks over how the Chinese company is actually going to run the Swedish carmaker. After all, if Ford, with all its experience of running foreign brands, couldn’t make Volvo a success, what will Geely be able to do, all the way from the east coast of China?
Anyway, I’m not the only one who is worried. The China Daily has run a scathing editorial on the deal.
"The huge purchase could also be the privately owned automaker’s fast track to financial ruin," says the state-run paper.
"Addressing the issue of money, Yin Daqing, Geely’s chief finance officer, said in Beijing on Tuesday that Geely has obtained "enough" financing to foot Ford’s $1.8 billion bill and still have $0.9 billion left over for future operational costs.
"However, according to a Bloomberg report last week citing a Volvo board member, in reality the Chinese automaker will need at least $1.4 billion to revive the troubled Swedish brand, a sum that Geely may be hard pressed to come up with.
"Domestic auto analysts agree, forecasting Geely will need between $1.6 billion to $2 billion to keep the Swedish firm operational.
"Volvo reported losses of $1.69 billion (almost 10.5 billion yuan) in 2008. That compares with a 1 billion yuan profit for Geely in 2009.
"Last year Li admitted that the company had about 10 billion yuan in debt, a sum he later declined to explain in detail.
"Based on those numbers, it appears near impossible for Geely to garner the financial support required to revive the Volvo brand."
The China Daily then goes on to quote analysts rubbishing Li’s claim that Geely will return Volvo to profitability within two years. The China Daily, as an English language paper, does not really represent the views of the government, but such a stinging criticism would have had to pass through the relevant departments for approval. I don’t hear huge government support for Geely.
You must log in to post a comment.