Mike Stevens | Mar 29, 2010

FORD AND GEELY have today announced a binding agreement on the sale of Volvo, which will see the Chinese carmaker buy the Swedish brand from Ford for nearly AU$1.98 billion dollars - roughly a third of Ford's original buyout of Volvo in 1999.

Ford Chief Financial Officer Lewis Booth told press today that the US carmaker considered the sale a "fair price for a good business". The sale is expected to be finalised by the third quarter of this year.

The deal will see Ford and Volvo continuing as technology partners, Ford utilising existing co-developed safety systems and Volvo drawing powertrains from Ford's line-up.

In December, Ford said that the sale of Volvo would benefit the American automaker by enabling it to focus on the recovery of its core brand.

"The prospective sale would ensure Volvo has the resources, including the capital investment, necessary to further strengthen the business and build its global franchise, while enabling Ford to continue to focus on and implement its core ONE Ford strategy."

Under the terms of the agreement, the two companies will continue to cooperate on projects already underway, with Volvo remaining a separate company with its own Sweden-based headquarters.

Geely chairman Li Shufu said this week that Volvo will also retain its European production lines, adding that Volvo labour unions - initially critical of the deal - were now supporting the sale.

"I have a deep belief that the manufacturing footprint in Gothenburg and Belgium will be preserved in the longer term," Mr Li said.

While Volvos will continue to roll off Swedish assembly lines, Geely is also planning a factory in Beijing which will make 300,000 Volvo-branded cars each year.

"We want to stabilize and enhance the traditional markets in Europe and North America, and at the same time develop the other Volvo business in emerging markets, including China," Mr Li said.

Geely aims to boost its total production - including Volvo cars - from 330,000 sales in 2009 to two million by 2015.

Volvo production is expected to continue unchanged, with the recently revealed 2010 Volvo S60 expected to arrive in Australia later this year.

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