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.

GM prepares to announce Pontiac closure next week

General Motors is preparing to announce early next week that the Pontiac brand will be eliminated, said a source familiar with the company's plans.

The announcement will be made as part of an updated viability report to the U.S. auto task force, the source said. A second source indicated earlier this week that GM, surviving with $15.4 billion in U.S. bailout funds, was considering phasing out Pontiac instead of sticking with a plan to have it continue as a niche brand.

In its proposal to the U.S. Treasury on Feb. 17, GM said Cadillac, Chevrolet, Buick and GMC would be its four core U.S. brands. On March 31, the task force told GM that its restructuring plan wasn't aggressive enough and denied a request for $16.6 billion in additional aid.

Pontiac spokesman Jim Hopson declined to comment on Pontiac's future.

"I can't speculate what next week is going to hold," he said. "When we were asked to go back and look at the viability plan, everything went back on the table. We're reviewing everything. Nothing is sacred. We're still under the original viability plan until told otherwise."

The U.S. today granted $2 billion to keep GM operating while it prepares for a new, June 1 restructuring deadline. GM has been staying afloat with $13.4 billion in U.S. loans granted in December by President George W. Bush.

Bloomberg News said GM is expected to tell the government that it will stick with plans to keep GMC, Buick, Chevrolet and Cadillac.

Saab, Hummer and Saturn are for sale.

Muscle-car icon

Pontiac, which launched the 1960s U.S. muscle-car era with the GTO, sold 267,348 vehicles in the United States last year, less than a third of its 1978 peak of 896,980. This year's volume dropped 43.5 percent through March as industrywide demand fell 38.4 percent.

"Pontiac is one of my favorites -- I especially like the G8," said John Pitre, general manager of Motor City Auto Center in Bakersfield, Calif., which sells Buick-Pontiac-GMC and Saturn. "I would be sad to see it phased out. However, if some of those products became part of the Buick brand, I could understand GM's logic."

Chris Haydocy, who owns a Buick-Pontiac-GMC store in Columbus, Ohio, said Pontiac isn't essential as long as the revamped sales channel provides most of what customers are looking for.

Said Haydocy: "I think you need 10 or 12 models to do that."

Killing Pontiac would make sense, said George Peterson, president of marketing and product consulting firm AutoPacific Inc.

"It's sort of a shadow of itself," he said. "All of the Pontiacs, except for the G8, are copies of Chevrolets or GMCs, so there really isn't any reason to keep Pontiac around.''

GM introduced Pontiac in 1926. GM decided to kill Oldsmobile in 2000, three years after its 100th anniversary.

Camaro meets the press, GM execs tout mpg

Unveilings take place in Detroit, Los Angeles

General Motors today showed off the widely anticipated 2010 Chevrolet Camaro to the media, telling reporters it will beat competitors' fuel economy.

"We'll be promoting the fuel economy story very much," Ed Peper, vice president of Chevrolet, told reporters. "We are 2 or 3 mpg ahead of the competition."

The vehicle will be built at GM's Oshawa, Ontario, plant in Canada. Production is slated to begin on Feb. 16, 2009.

Peper said the V-6 version will get an estimated 26 mpg, while the V-8 version will get an estimated 23 mpg. The V-6 will get 304 hp, while the V-8 will get 422 hp.

"And we are still working on it," Peper said. He also hinted that a turbo 4-cylinder version could be in the works.

Sales begin in the first quarter of 2009, and Peper said more than 6,000 hand-raisers are interested in the car. The early-year launch will help spur sales, Peper said, because spring tends to be a popular time for consumers buying sports cars.

GM will disclose a price once the vehicle is closer to production, but Peper said the Camaro will be the "best value in the sports car segment."

The company plans to launch a convertible version in 2010.

GM is counting on the baby-boomer crowd for out-of-the-box demand, Peper said. The company's biggest challenge will be to attract buyers who aren't traditional enthusiasts.

Initially, Peper expects demand for the V-6 and V-8 versions will be split about 50-50, as enthusiasts will want the V-8. Long-term, he expects the V-6 version to be the sales leader.

Taking on the competition

GM views the Camaro's competitors as the Ford Mustang, Nissan's 350-Z and the Dodge Challenger, Cheryl Pilcher, product manager for the Camaro, said during the vehicle's unveiling in Los Angeles.

As for volumes, "we will build as many as we can sell," says Pilcher.

The production version of the Camaro doesn't stray much from the concept car GM showed in Detroit in 2006, though the chassis is different, says Vince Muniga, engineering spokesman for GM. The new Camaro is built on the GM's global rear wheel drive platform.

Says Tom Peters, design director for the Camaro exterior: "Our main goal was to get as close to the concept as possible."

The same is true for the interior, says John Zelenak, design manager for the Camaro interior.

Dealers are excited about the new Camaro.

"We have lots of lots of people waiting," to see the car, says Rusty Bunstead, sales manager at the Courtesy Chevrolet dealership in Morgan Hill, Calif., a city south of San Francisco.

Courtesy added a Camaro button on its Web site where customers could see a video and sign up to receive updates on the model long before the launch.

Courtesy Chevrolet is one of the largest Corvette dealers in the United States. It has two dealerships, one in Morgan Hill and one in San Jose, Calif.

Says Bunstead: "The Camaro is the poor man's Corvette."

Craig Trudell contributed to this report

ENLARGE Ed Welburn, GM design vice president, and Ed Peper, vice president of Chevrolet, show off the 2010 Camaro in suburban Detroit today. Photo credit: RICK KRANZ

PRESS RELEASE: Chevrolet Unveils the 2010 Camaro – A Fun, Efficient Sports Car for the 21st Century

Oshawa, Ontario (July 21, 2008) – Chevrolet today introduced the production 2010 Camaro being built at GM's Oshawa Car Assembly Plant. It is a heritage-inspired sports car for the 21st century, combining great looks and performance; advanced technology and surprising efficiency – including 9.0 L/100km estimated highway fuel consumption on the high volume V6 models. Sales begin in the first quarter of 2009.

"The new Chevrolet Camaro delivers the best of both worlds – great heritage and a thoroughly modern, advanced package of sporty driving, comfort and technology," said Marc Comeau, vice president sales, service and marketing for GM of Canada. "And it does so with styling, fuel economy and value our competitors simply can't match."

Built on GM's new, global rear-wheel-drive architecture, the Camaro is offered in V-6-powered LS and LT models, as well as the V-8-powered SS. All models and powertrain combinations include fuel-saving six-speed transmissions.

Product highlights include:

o Sleek, heritage-inspired interior and exterior styling with contemporary cues

o Robust body structure, exceptional build quality and suite of safety features including 6 standard airbags

o Advanced powertrain technologies, including engines with direct injection and Active Fuel Management, enabling a balance of performance and fuel economy

o Four-wheel independent suspension system tuned to match the performance capabilities of the respective powertrains

o Variable-rate power steering with the rack mounted forward of the front axle for better weight balance and greater driver feel

o Four-wheel disc brake systems standard on all models, including four-piston Brembo calipers on SS models

o StabiliTrak stability control system and traction control standard on all models

o Family of 18-, 19- and 20-inch wheels

The new Camaro also has technologies that enhance comfort and convenience, including:

o Bluetooth phone connectivity

o Premium Boston Acoustics audio system

o USB connectivity

o Ultrasonic rear parking assist (late introduction)

o Remote vehicle starting system

o OnStar

o XM Satellite Radio

Powertrains

An advanced, efficient 3.6L direct-injected V-6 with variable valve timing is standard on LS and LT models, which are expected to comprise at least 70% of Camaro sales in Canada. Direct injection technology helps the engine deliver more power through increased efficiency, while maintaining fuel economy and lowering emissions. That means less fuel is consumed and lower emissions generated – including a 25-percent drop in cold-start hydrocarbon emissions.

The Camaro's 3.6L engine also employs variable valve timing to optimize performance and fuel economy across the rpm range. It is rated at an estimated 300 horsepower (224 kW) and 273 lb.-ft. of torque (370 Nm). A six-speed manual transmission is standard with the 3.6L engine; a Hydra-Matic 6L50 electronically controlled six-speed automatic, with TAPshift control, is available.

The high-performance Camaro SS is equipped with a powerful 6.2L V-8, with a choice of a six-speed manual or six-speed automatic transmission. Manual-equipped models receive the LS3 engine, estimated at 422 horsepower (315 kW) and 408 lb.-ft. of torque (553 Nm) and is paired with a TR6060 six-speed transmission.

A new, L99 engine, based on the LS3, is used on automatic transmission-equipped SS models and also includes GM's fuel-saving Active Fuel Management feature to improve fuel economy. The L99 is estimated at 400 horsepower (299 kW) and 395 lb.-ft. of torque (535 Nm); and it is matched with a Hydra-Matic 6L80 six-speed transmission. This combination delivers an estimated 10.2 L/100km of fuel consumption on the highway.

The 2010 Camaro exemplifies GM's global development process. The design concept originated in the United States; engineering was directed by GM's global rear-wheel-drive team in Australia; validation was conducted on roads around the world and assembly will take place at GM's award-winning Oshawa Car Assembly Plant in Canada.

General Motors of Canada (GMCL) is engineering and manufacturing advanced environmental technologies ranging from Active Fuel Management (cylinder deactivation) and hybrid systems to E85 biofuel and fuel cell vehicles – more than any other auto company right here in Canada. Headquartered in Oshawa Ontario, GMCL employs more than 15,000 people nationwide. GM of Canada manufactures vehicles, vehicle powertrains, and markets the full range of General Motors vehicles and related services through 732 dealerships and retailers across Canada. Vehicles sold through this network include Chevrolet, Buick, Pontiac, GMC, Saturn, Hummer, Saab and Cadillac.

GM mulls job cuts, sale of brands

General Motors could shed thousands of white-collar jobs and sell or cease producing certain brands as part of a strategy reevaluation, said the Wall Street Journal, citing people familiar with the matter.

The job cuts are expected to be approved at a meeting of the GM board in early August. The management may also suggest options for raising additional cash to help GM make it through the downturn, and may discuss cutting certain brands, the sources said.

A company spokesman declined to comment on either the job or brand cuts, said the report.

GM sells under eight different brands, but most, including Buick, Saturn and Saab, struggle to attract buyers. The company has already decided to put its Hummer division up for sale.

On the job cuts, GM employs 76,000 white-collar workers globally, with the bulk of the force based in North America, said the report.