Volvo Cars turns to Belgium for loan help

Following a breakdown in talks between Volvo Cars and the Swedish government over loan guarantees, the automaker now plans to ask authorities in Belgium for help securing a loan from the European Investment Bank (EIB).

The Swedish carmaker, owned by US giant Ford, had been in discussions with Stockholm to act as guarantor for €200 million ($266 million) loan from the EIB.

But Volvo Cars also has a factory in Ghent in Belgium’s Flanders region and on Thursday CEO Stephen Odell said in an interview that the company will now ask the Flemish government to back their application.

He also hinted that the result of those talks could influence where new models are built.

“It is clear that a loan guarantee from Belgium could affect our future decisions on the location of production and product development,” he told the Swedish business daily Dagens Industri.

“I cannot allow Volvo Cars to be at a disadvantage against competitors who have the backing of their governments…I must do something,” Odell said.

“The opportunities in Belgium are greater in the short term. They also have a more flexible system that increases capacity to retain more employees,” he added.

However, the chief executive stressed the company had no plans to close its factory in Torslanda, just outside Gothenburg in southwestern Sweden

“Volvo’s DNA is found in Sweden,” Odell was quoted as saying.

On March 12, the European Investment Bank granted €3.0 billion in loans to a number of European carmakers, €200 million of which was earmarked for Volvo Cars.

But the securing of those loans was dependent on the Swedish government agreeing to act as a guarantor, leading the company to intensify discussions with the Flemish authorities.

Volvo Cars spokeswoman Maria Bohlin told AFP initial talks had been held with officials in Flanders earlier this year.

Volvo Cars has been a separate company from the Volvo Group, the truckmaker, since it was acquired by Ford in 1999 for $6.45 billion.

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Volvo stays in fast lane despite China dip

Swedish automaker Volvo Cars, owned by China's Geely, reported Wednesday a rise in first half profits even as sales tumbled in its biggest market, China.

Volvo stays in fast lane despite China dip
Volvo Cars' Swedish chief executive, Håkan Samuelsson. Photo: Bertil Ericson/TT

Note: An earlier version of this story said that first-half profits fell. While net profit attributable to shareholders indeed fell, overall net profits were up. The story has been amended to reflect this.

Net profit more than tripled to 877 million kronor (92 million euros, $56 million), while turnover climbed by 12 percent to 75.2 billion kronor.

Operating profit surged by more than 70 percent to 1.66 billion kronor, thanks to a strong US currency and robust sales of Volvo's SUV model XC60.

But net income attributable to owners of the parent company dropped by 60 percent to 173 million kronor (18 million euros, $20 million).

Volvo's overall car sales in terms of units rose by 1.4 percent to 232,284 during the first half.

The strongest sales growth was registered in Sweden and western Europe, while they remained stable in the United States and declined in China, by 1.2 percent, and the rest of the world, including Russia.

Volvo went through several dark years before returning to profit in 2013. In 2014, it beat its sales record from 2007, selling almost 466,000 vehicles. CEO Hakan Samuelsson told Swedish news agency TT the company expects to sell 500,000 cars this year.

The number of Volvo employees has risen by 10 percent in the past year, to 28,000 worldwide.

Despite its economic slowdown, Volvo plans to boost its presence in China and has acquired 50 percent of three joint ventures from parent company Geely: two assembly plants and one research and development centre.

Geely paid $1.8 billion to buy Volvo from US carmaker Ford in 2010.