Parent Geely and subsidiary Volvo Cars plan to merge their existing combustion engine operations into a stand alone business in order to establish a new global supplier that will develop combustion engines and hybrid powertrains, the pair announced in a statement.
The proposed new business would clear the way for Volvo Cars to focus on the development of its all electric range of premium cars.
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The automaker is building an entirely electrified product range as part of a plan to put sustainability at the core of its operations. By the middle of the next decade it expects half its global sales to be fully electric and the other half hybrid, supplied by the new powertrain unit.
For Geely, the planned new entity means technologically-advanced and efficient combustion engines and hybrid powertrains would be available to Geely Auto, Proton, Lotus, LEVC and Lynk & Co. The planned new stand alone business can also supply third party manufacturers, providing possible growth opportunities.
The planned new business would represent a significant industrial collaboration between Volvo Cars and Geely with substantial operational, industrial and financial synergies.
The proposed new business is intended to be an attractive employer for approximately 3,000 people at Volvo Cars and around 5,000 at Geely's combustion engine operations including research and development, procurement, manufacturing, IT and finance functions.
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By GlobalDataNo workforce reductions are anticipated.
Both Volvo Cars and Geely are in the process of carving out their ICE operations into new units within their respective organisations, as a first step towards a merger of the two into the combined new stand alone business.
Volvo Cars believes the electrification of the automotive industry will be a gradual process, meaning there will be significant ongoing demand for efficient hybrid powertrains alongside fully electric offerings.
"Hybrid cars need the best internal combustion engines. This new unit will have the resources, scale and expertise to develop these powertrains cost efficiently," said Hakan Samuelsson, Volvo Cars' president and chief executive, in the statement.
The detailed plans of the new business are under development and subject to union negotiations as well as board and relevant authority approvals.
