EU approves Swedish aid to Volvo for green cars

Published: 05 Jun 2009 01:46:50 PST

BRUSSELS, June 5 - The Swedish government won approval from the European Commission on Friday to guarantee loans from the European Investment Bank for Ford Motor Co unit Volvo PV to help co-finance the development of green cars.

Volvo PV plans to use the loans of 500 million euros ($710 million) for a 1.9 billion euro project to develop emission reductions and energy efficiency in cars, the Commission, executive arm of the European Union, said in a statement.

"The state guarantees would contribute to Volvo's investment project for environmentally friendly cars without giving rise to any undue distortions of competition," EU Competition Commissioner Neelie Kroes said.

The loans and guarantees would be provided in five tranches from 2009 to 2010 with a maturity of seven years.

Volvo would pay a premium for the guarantees and provide the Swedish government with high-quality collateral covering the full guaranteed amount, the Commission said.