Geely to invest £586m in Volvo

Geely will invest £586 million (Rs 3,990 crore) of operating capital into Volvo when its purchase is complete, its chairman has announced.

Geely chairman Li Shufu made the announcement at the Beijing motor show, in a bid to dispel concerns that Volvo's position as a premium car maker would be diluted by its association with Geely, which is best-known as a low-cost car maker.

"After the takeover, Geely and Volvo are brothers instead of a father and son," said Shufu. "Geely will not produce Volvo cars. Volvo will not make Geely cars."

Ford entered into a definitive agreement to sell Volvo and related assets to Zhejiang Geely Holding Group in a $1.8 (Rs 8,100 crore) billion deal last month.

Following the agreement, the sale is expected to close in the third quarter of 2010, subject to approval from governments around the world.

Geely will own Volvo outright, with Ford retaining no shareholding in the company. However, Ford will continue to supply Volvo with powertrains, stampings and other vehicle components for unspecified periods. As part of the sale, Ford also has committed to provide engineering support, information technology, access to tooling for common components, and other selected services for an unspecified transition period.

Ford and Geely have also established protocol agreements to govern the use of intellectual property; these agreements will also allow Volvo to grant sublicenses to certain portions of Ford’s intellectual property used by Volvo to third parties, including Geely. The IP deals are expected to last the length of Volvo's current product cycle.