China's Zhejiang Geely Holding Group Co. signed a deal Sunday to buy Ford Motor Co.'s troubled Volvo car unit, said the Swedish automaker, confirming earlier reports from China's state media.
Geely Chairman Li Shufu traveled to Sweden Friday to finalize the acquisition, which would be a landmark deal for China's burgeoning car industry but also pose serious challenges for Geely.
Under the preliminary agreement, Geely was to pay $1.8 billion for Ford's money-losing Swedish car brand with financing from banks in China, the U.S. and Europe, including low-interest loans guaranteed by the governments of Sweden and Belgium, according to Friday's edition of The Wall Street Journal.
The deal would be the culmination of years of planning by Geely and intensive negotiations with Ford over the last 18 months. The deal would make Volvo one of the most prominent foreign brands to be purchased by China, and would mark the first time a Chinese company has acquired the full operations of a major foreign automaker.
It would also be the biggest step so far in a broader push by China to create a handful of globally competitive automakers out of an industry that today is largely fragmented. That effort has had mixed success: Beijing Automotive Industry Holding Co. reached an agreement in December to acquire certain assets of General Motors Co.'s Saab unit, but another Chinese company, Sichuan Tengzhong Heavy Industrial Machinery, last month abandoned a planned purchase of GM's Hummer unit after failing to gain Chinese government approval.
Chinese car makers are gaining strength thanks in part to a home market that has boomed as the rest of the world has sputtered. Passenger-vehicle sales in the country rose nearly 50% last year, with total vehicle sales exceeding 13 million, putting China ahead of the U.S. as the world's biggest auto market.
Ford and Geely signed a framework agreement for the Volvo transaction in December, and Ford said it expected a definitive agreement to be signed by the end of March and the sale to be finished by midyear.