Swedish government prepared to guarantee loan for Volvo Cars

Feb 24, 2009, 8:20 GMT

Stockholm - The Swedish government was set to guarantee a loan for Volvo Cars, the Swedish subsidiary of US automotive giant Ford, reports said Tuesday.

State secretary Joran Hagglund said the government was due to approve an application from Volvo Cars likely to be filed to the European Investment bank (EIB) next month, financial daily Dagens Industri reported.

The government was to guarantee 90 per cent of a 5-billion-kronor (573 million dollars) loan, Hagglund said.

The remaining 10 per cent would be secured from other sources.

The government's stance appeared more benevolent to Volvo Cars compared to Swedish loss-making rival Saab, the brand that US giant General Motors wants to shed latest January 2010.

'Unlike GM, Ford has clearly stated they will take full ownership responsibility and guarantee capital flows to Volvo Cars until they have found a new owner for Volvo Cars,' Hagglund was quoted as saying.

Saab on Friday filed for bankruptcy protection as part of attempts to reorganize its business, including creating a new independent entity from GM.

Hagglund and Enterprise Minister Maud Olofsson on Monday visited Trollhattan, south-western Sweden for talks with the Saab management and union leaders.

The government has said it would not take over ownership of Saab.

Volvo Cars had some 24,000 employees worldwide in 2008 of which some 17,000 in Sweden.

Saab employs some 4,000 people in Sweden. GM's interest in Saab - one of Europe's smallest car makers - dates back to the early 1990s, and the concern took full control in 2000.