Volvo is preparing to issue bonds for the first time as a stand-alone carmaker as the Swedish company enters the next phase of its turnround having recently developed a new manufacturing platform and launched upmarket models.
A move into the capital markets by the Gothenburg-based company, which has been owned by Zhejiang Geely Holding of China since 2010, could be a prelude to a stock market debut, say people close to the carmaker.
“What’s important for us is, I think, is that we have to improve the company and run it as if it was listed,” said Hakan Samuelsson, chief executive. “That is very healthy for the company and that is what we are doing.”
Volvo has been engaged in an ambitious and expensive overhaul that began when Ford sold the company to Geely in 2010.
Mr Samuelsson told the Financial Times: “We have to be ready to go out on the bond market...acting as a listed company with all the transparency and reporting that is required. So I wouldn’t exclude that we would go out on the bond market [in 2016].”
The Swedish brand has built an $11bn platform for a new range of large cars, beginning with the XC90 sport utility vehicle that launched last year as the first car produced under Geely. It was followed this month by the newly unveiled S90 saloon.
By 2019, the XC90 will be the oldest car in the company’s revamped nine-model line-up and, at that stage, Volvo aims to be selling almost 800,000 cars a year — versus 466,000 in 2014.
To finance its growth ambitions, Volvo relies on cash flow and several loans from the China Development Bank, including an $800m loan sealed in 2013. Earlier this year it paid $260m to take control of three Chinese factories, which was funded by loans from the parent company.
Raising money on the bond market would mark a further step towards Volvo operating in effect as an independent entity. But the underlying profitability of the business remains weak, with first-half operating margins at 2.2 per cent.
Mr Samuelsson said the company had no issues with its existing financing and played down any suggestion that Volvo needed external sources of money to fund growth.
He also cautioned that any stock market flotation was a matter for the owner. Zhejiang Geely Holding said there were no “immediate” plans for Volvo to be listed or to access the bond markets.
But a person close to the company said: “The idea of a Chinese-owned premium player with high volumes and factories on three continents. Why behave like a listed company if you don’t want to be a listed company?”
The last time the carmaker issued a bond was as part of Volvo AB, its former Swedish parent that makes trucks, buses and construction equipment.