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China's vice president Sweden-bound as Geely-Volvo deal nears

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China's vice president Sweden-bound as Geely-Volvo deal nears

March 26, 2010 12:07 CET

HONG KONG (Reuters) – Chinese Vice-President Xi Jinping will travel to Sweden this weekend, amid talk he will attend the signing of a deal for Zhejiang Geely Holding Group to buy Ford Motor Co's Volvo car unit for as much as $2 billion, China's biggest ever overseas auto acquisition.

During his four-day state visit starting Saturday, Xi will meet Sweden's king and senior officials and visit the city of Gothenburg, China's official Xinhua News Agency reported.

Volvo spokesman Olle Axelson confirmed that preparations were underway for an announcement at the company's headquarters in Gothenburg, the Detroit News reported. It and other foreign media quoted unidentified sources saying the ceremony would be held on Sunday, with Xi in attendance.

A Zhejiang Geely representative declined to comment, but told Reuters on Friday that the company still aimed to sign a sales and purchase agreement by the end of March.

China surpassed the United States to become the world's biggest car market last year, and is keen to move into Western markets but lacks the technology and brand recognition to do so. Deals like the Volvo purchase would help Chinese carmaker to get around some of those obstacles more quickly.

Zhejiang Geely, parent of Hong Kong-listed Geely Automobile Holdings Ltd, plans to pay up to $2 billion for Volvo and pull the Swedish carmaker out of the red by 2011 by adding a new factory in China to nearly double its annual global production.

However, unions at Volvo have withheld their backing for the deal, setting the stage for a potentially troublesome takeover.

On Thursday, Volvo unions said in a joint statement that they had still not received any information about how the capital needs of Volvo would be met, nor which investors were backing the deal and the composition of management of the company.

Organized labor cannot block the deal, but the backing of employees and politically influential unions will be important if Zhejiang Geely's goal of pulling the Swedish carmaker out of the red by the end of next year is to be achieved.

A Geely representative declined to comment on the union opposition.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100326/ANE/100329923/1257#ixzz0jIN7ak3i

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