Belgium aids Volvo in bid to protect jobs

The Flemish government has responded positively to an appeal from Volvo Cars CEO Stephen Odell to support its Belgian operations.

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Odell met Kris Peeters, the prime minister of the Flemish regional government, on Monday to discuss support and loan guarantees to the troubled Ford-owned Swedish company, which operates a factory in Gent.

Both Odel and Peeters were satisfied with the outcome of the meeting and the Flemish government confirmed its willingness to support Volvo.

"It is important that the factory in Gent has a future. The jobs there are very important," Peeters said.

"Under certain conditions we are prepared to provide guarantees of €200 million ($280) to 300 million for the European Investment Bank (EIB) loans."

The terms of the deal will now be discussed in detail to see if the parties can reach agreement.

For the Flemish regional government it is important that Volvo commits to continuing its manufacture in Gent and protects the Belgian jobs.

Peeters was asked by the news agency TT whether the Swedish government's decision to freeze discussions with Volvo due to uncertainty over the future ownership structure had an impact on their decision.

"We have discussed it. But we have decided not to freeze discussions. This is the difference between the Swedish government and us."

The factory in Gent is Volvo Cars largest, larger than in Torslanda in Sweden, and almost 3,800 people work there.

The Gent factory has escaped relatively unscathed from staff cuts. It is here that Volvo's smaller models are manufactured and also the new XC 60 - Volvo's best selling model.

The exchange of words between the Swedish government and Volvo led to Stephen Odell penning a letter to the trade and industry minister Maud Olofsson and finance minister Anders Borg last week in which he sought reconciliation, underlining that he did not consider Volvo's relations to be better with Belgium than Sweden.

The EIB approved a loan of 200 million euros to Volvo Cars in March for the development of environmentally-friendly technology. This research is set to be undertaken in Sweden.

The money was to be paid out as soon as the (Swedish) state guarantees were secured. But negotiations were broken off while the ownership situation remained unclear.

The decision was jointly taken by the Swedish government and Volvo.

As troubled US firm Ford is engaged in a prospective sale of Volvo, the firm was unable to meet the long term commitments required by the government to guarantee the loans.