Geely nears Volvo deal, plans China production

China's Zhejiang Geely Holdings will produce up to 300,000 Volvo cars a year at a new factory in Beijing as part of its plan to pull the Swedish brand out of the red by 2011, a source said on Tuesday.

Zhejiang Geely, parent of Hong Kong-listed Geely Automobile, aims to complete the purchase of Ford Motor Co.'s Volvo unit for up to $2 billion by May, according to the source and to a document submitted to regulators by Geely and seen by Reuters.

The addition of such capacity would nearly double Geely's current output, which reached 321,900 units in 2009 for the entire group, up 45 percent from a year earlier. Geely has set an ambitious annual sales target of 2 million cars by 2015.

Analysts said the 2011 break-even target could be a stretch for Geely, which has no experience running a foreign company.

"I think it's optimistic to break even next year as it needs to build a plant first and it might take time for Chinese buyers to accept a made-in-China Volvo," said John Zeng, an analyst with IHS Global Insight. "It will break even eventually but that's going to take time."

Geely Automobile Holdings Ltd is China's largest private car maker. Its charismatic founder, Li Shu Fu, sometimes likened to Henry Ford, has shown global ambitions for Geely, which means "lucky" in Chinese.

Ford, the only major U.S. automaker to avoid bankruptcy last year, is selling its luxury Swedish brand to free up cash as it climbs out of the industry's worst ever downturn.

The deal would see Geely acquire Volvo for $1.5 billion to $2 billion, with an expected closing date in May after the signing of the initial agreement next month, according to a copy of the Geely document.

Geely said in December it was near such a deal, and later added it had strong support from the Chinese government for the purchase.

Geely will set up a separate company with registered capital of 8 billion yuan ($1.17 billion) to buy Volvo. Foreign strategic investors and the Hong Kong-listed Geely will hold a 51 percent stake of the company.

Geely shares were down 3.7 percent, amid a broader market sell-off and following a run-up that saw the shares more than double since mid-September on hopes for a Ford deal.

The purchase would be the biggest in a recent spate of similar acquisitions of distressed global assets by Chinese carmakers, which have thrived during the global downturn due to strong incentives for their industry under Beijing's 4 trillion yuan ($586 billion) stimulus plan.

Under the deal, Geely will keep the brand and operations in Sweden, including Volvo's headquarters, production facility and research center, intact after the acquisition.

"(Geely) will keep the core value of Volvo as a luxury brand unchanged, while improving it with the development in emerging markets, and add more fashionable, dynamic and passionate international elements," said the document.

Volvo is expected to post earnings before interest and tax (EBIT) of $703 million in 2015, the document said.

A Geely representative declined to comment.

Among other deals involving Chinese vehicle makers, Sichuan Tengzhong Heavy Industrial Machinery is in the process of buying General Motors Co.'s Hummer brand, though that deal has yet to close and GM said earlier this month it is still awaiting approval by Chinese regulators.

Last month, Beijing Automotive Industry Holding Corp (BAIC) sealed a deal to buy technology from GM's Saab unit for $200 million, saying it would use the technology to launch an aggressive campaign to develop its brand both at home and overseas.

The buying spree comes as China zoomed past the United States to become the world's largest auto market last year.

Vehicle sales in the country jumped 46 percent to a record 13.6 million units for the year, according to the China Association of Automobile Manufacturers, well above the 10.4 million cars and light trucks sold in the battered U.S. market.

Analysts expect China's car sales to continue growing this year under renewed government incentives, though they expect the growth rate to slow to about 10 percent.

Jaguar Land Rover CEO leaves company

Jaguar Land Rover said CEO David Smith will leave the company.

The company said Ravi Kant, managing director of JLR owner Tata Motors, will assume Smith's responsibilities until a successor is announced.

Tata appointed Smith, 48, as JLR CEO in 2008 after the Indian conglomerate bought the British maker of sports cars and SUVs from Ford Motor Co.

"The company would like to thank David for his efforts in the role and for his service to Jaguar and Land Rover over many years," JLR said in a statement on Monday.

Smith, an Englishman, joined Ford in 1983 and served as a finance and strategy expert for Ford of Europe and its Premier Automotive Group during a long career with the U.S. automaker.

He was JLR's chief financial officer before Tata bought the carmaker and served as the company's acting CEO after death of then-CEO Geoff Polites in April 2008. Two months later Tata confirmed Smith's CEO role.

Last month, press reports in the UK and Germany said Carl-Peter Forster, who quit as head of General Motors Europe last November, will take over a senior position at JLR.

The Financial Times said Tata wants Forster to help JLR's plans to switch its product portfolio to low-emission vehicles. During his time with GM Europe Forster led a quality offensive at Opel and a move into low-emission and electric cars.

Forster gained experience with Land Rover during his time as head of production at BMW in the 1990s when BMW owned the British SUV brand, the Financial Times said.

The German weekly magazine Focus also said Forster will join Tata but said he would lead the introduction of the Nano minicar in Europe in 2011.

GM investing more in truck fuel economy, other improvements

General Motors Co. is beefing up spending on its next-generation light-duty, full-sized truck program to create more fuel-efficient, more attractive pickups.

The re-engineered and restyled light-duty Chevrolet Silverado and GMC Sierra pickups are expected to debut around the 2013 model year. The pickup program had been put on hold prior to GM's Chapter 11 bankruptcy filing. The trucks now will land in showrooms at about the same time as originally planned.

“Now we have more cash reserves to spend on product than we have had in decades,” said Scott Fosgard, a GM spokesman.

Fosgard declined to put a specific dollar figure on the added investment, saying only that it would be in the hundreds of millions of dollars.

“We are investing it in four brands, not eight,” he said. “We are investing it in 34 nameplates not 50. So we have enough money to do what we said we would do, and that is, we are going to build the world's best vehicles and we are going to play to win in every segment.”

Fuel economy boost

GM will use the additional funding to boost fuel economy. Specifically, it will reduce vehicle weight and make the pickups more aerodynamic, either through styling changes or features that reduce aerodynamic drag.

GM would not provide specifics, but one proposal that had been under consideration prior to the bankruptcy filing was electrically operated movable slots that would open or close the grille. A closed grille makes a vehicle more aerodynamic. The Cadillac Provoq crossover concept first featured movable grille louvers at the 2008 Detroit auto show.

Additionally, interior materials will be upgraded, and new undisclosed features will be added to the pickup line.

Unaffected by the plan are GM's next-generation heavy-duty pickups. The three-quarter ton 2011 Silverado 2500 and one-ton 3500 pickup will debut Feb. 10 at the Chicago Auto Show. The timetable for the debut of the Sierra heavy-duty pickups has not been announced.

Sales down

Last year, GM had combined light- and heavy-duty pickup sales of 470,906, a 33 percent decline from the previous year. Full-sized pickups accounted for 20.7 percent of GM's total vehicle volume in 2009, a drop of 32 percent from the previous year.

Last month, GM Vice Chairman Bob Lutz said that the redesigned Malibu had been rescheduled for sale sometime in 2011 -- the same year as originally planned. Several months earlier, in August, GM executives said the car would debut in 2012.

"Once we got out of the bankruptcy and started having money available, we were able to pull a lot of our programs forward," back to the original timetable, Lutz said at a December Chevrolet press event. He said "a bunch" of vehicles were being pulled forward but gave no details.

GM criticized for winding down Saab despite bids to buy brand

General Motors Co. was criticized in Sweden after the U.S. automaker named a restructuring firm to run the winding-down of Saab even as it reviewed several bids which included an offer from Formula One supremo Bernie Ecclestone.

"It is irresponsible of GM to move at the same time in two different directions -- both toward a sale and a wind-down," IF Metall chairman Stefan Lofven said in a statement.

GM has been trying to sell Saab for more than a year and is preparing to shut the money-losing brand if it doesn't consider the bids for the the 60-year old company suitable.

In a statement on Friday, GM named consultancy AlixPartners -- already closely involved in GM's restructuring -- to run Saab's liquidation. GM said the process is expected to take several months.

GM also confirmed that it had received several offers for Saab and said it is evaluating the bids. This evaluation is not affected by the appointment of AlixPartners, GM said.

Saab an 'amazing brand'

Dutch luxury carmaker Spyker Cars NV made an improved bid for Saab, while Ecclestone joined forces with Luxembourg-based private investment company Genii Capital to pitch a rival proposal. A group of Swedish investors also scrambled to submit a bid.

Genii Capital, which recently invested in Renault's Formula One team, said it will "aggressively work towards a successful closing of the transaction with all the relevant stakeholders of the company."

Lars Carlstrom, a Swedish investor who is coordinating the Genii-Ecclestone bid, said the Formula One boss and his partners were keen on buying Saab mainly for the value of its brand.

"What Genii and Ecclestone have found is that Saab is an amazing brand, comparable to brands such as Porsche and BMW," he said. "They love brands and they really value Saab's brand ... They are really supportive and will definitely be able to bring Saab to new heights."

Ecclestone has $2.4 billion fortune

Ecclestone, 79, is one of the wealthiest figures in sport and was ranked 24th in Britain in the 2009 Sunday Times rich list with an estimated fortune of 1.5 billion pounds ($2.4 billion). He has been a leading player in Formula One since he bought the now-defunct Brabham team in 1972.

Spyker is hoping to gain Saab's technical resources and its distribution network, while bringing its entrepreneurial skills to the new group.

Swedish media reports on Friday named Jan Nygren, an ex executive of the aerospace arm of Saab and former senior official in the defense ministry, as the head of one group of Swedish investors submitting a last-minute bid.

Saab spokesman Eric Geers said any decision over its future and the latest round of bids was in the hands of General Motors. "We all hope these bids are strong enough for General Motors to consider them."