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Volvo makes deal with Chinese Geely

Volvo and Geely can share production lines and even share platforms. Photo: Geely chairman Li Shufu

The deal gives Geely access to Volvo's hybrid technology and small-car platform design, while Volvo gets Geely's buying power and allows it to share components. 

Does this cheapen Volvo? "No'' is the blunt answer from Volvo product planner Lex Kerssemakers. He indicated at the Geneva motor show earlier this month that Volvo needed a technology partner to share costs.

The unusual move of aligning with Geely is that since 2010, Geely owns Volvo. This week's technology deal stitches the companies closer and allows the sharing of manufacturing. 

Mr Kerssemakers said at Geneva that "Volvo won't renew our technical partnership with Ford''.

That means the end of a partnership with Ford - who until two years ago owned Volvo - and created the S40, V50, S60 and other models that shared platforms, components and drivetrains with Ford.

"We have to have alliances,'' Kerssemakers says. "We're talking to some companies and we may look to share engines in the future with a partner. "Anyone who makes a C-platform (Focus size) is a possible partner.'' 

Kerssemakers admitted at that time that Volvo is talking electrification and safety with Geely. "We are a bit ahead of China (in electrification),'' he says. "They look to us. But China is good at low-cost platforms and we could use that.'' 

Kerssemakers says "there's nothing wrong with (China's) quality. It won't diminish Volvo's quality. Customers aren't interested in where a car is made - they want good quality at a fair price.''

Under the deal, Volvo and Geely will jointly develop small engines, a small-car platform, and alternative energy vehicles such as electric cars, conventional hybrids and plug-in hybrids. Geely will get all of Volvo's safety equipment.

Volvo will get the ability to buy parts together with Geely, making the parts cheaper. They can share production lines and even share platforms. 

This will allow Volvo to reduce production costs in China, where it makes the S40 and S80 long wheelbase models - and soon, the V40 hatch - for domestic sales. The deal also ensures Geely and Volvo will be kept separate in marketing and sales.