Sweden promises €445 million in loan guarantees to Volvo

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2009 volvo s60 concept 001

2009 volvo s60 concept 001

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The solipsism of American media has a way of quietly filtering out much of the rest of the world, but the car industry is in a pinch just about everywhere. Nowhere is that picture clearer than in Sweden where ailing carmakers Saab and Volvo have been seeking government aid for months.

Today word that the Swedish government is willing to back €445 million ($572 million) in loan guarantees for Volvo emerged, though rival and compatriot Saab is still without aid.

Why would the Swedes treat their two brands so differently? Parentage. Ford has pledged its willingness to take full responsibility and to guarantee capital flows to Volvo, Swedish state secretary Joran Hagglund told Autmotive News.

General Motors, on the other hand, made no such vow and has let Saab go its own way. The company has since filed for reorganization to help it separate from GM's corporate structure.

There's a catch on Volvo's government-secured loans, however: 10% of the funds must be secured by private creditors. Convincing market participants that the company is still viable enough to repay what it borrows is no small hurdle.

Still, given the relatively strong global position of Ford and the company's commitment to back its Swedish brand, the private financing is likely to come through, and therefore so are the government loan guarantees.

Volvo has made several strides toward improving its relevance lately, adding several models to its efficient DRIVe line of vehicles and offering dramatic, if controversial, new concepts such as the S60 (pictured).
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