Geely could find Volvo a tough nut to crack
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| Geely Chairman Li Shufu (L) with CFO of Ford Motor Company, Lewis Booth (FRONT R) after signing a deal in Goteborg of Sweden. [CFP] |
![Geely Chairman Li Shufu (L) with CFO of Ford Motor Company, Lewis Booth (FRONT R) after signing a deal in Goteborg of Sweden. [CFP]](http://images.china.cn/attachement/jpg/site1007/20100331/001fd04cea510d1ce86d05.jpg "Geely Chairman Li Shufu (L) with CFO of Ford Motor Company, Lewis Booth (FRONT R) after signing a deal in Goteborg of Sweden. [CFP]")
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.
Moreover, "it will be very hard for Geely to allow Volvo to recover from its poor performance within two years because of the high operational costs associated with Volvo," said Frank Xu, head of mergers and acquisitions at China International Capital Corp Ltd.
Xu has helped several interested companies valuate Volvo since Ford first put the Swedish automaker on the market at the end of 2008.
The dealmaker also cast serious doubt on Li's promise to move Volvo out of the red in two years, indicating Volvo's profitability may come to the detriment of Geely.
In 1999, Ford spent $6.4 billion to acquire Volvo, and 10 years later will only receive $1.8 billion back. Even Ford, the century-old US auto giant, could not manage Volvo profitably.
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