Ford confirms sell of Volvo to Geely in 2010

DEARBORN, Mich., Dec. 23, 2009 Ford Motor Company confirmed today that all substantive commercial terms relating to the potential sale of Volvo Car Corporation have been settled between Ford and Zhejiang Geely Holding Group Company Limited. Geely is China’s largest privately held company.

Ford says that there is some work that still remains to be completed before signing “ including final documentation, financing and government approvals, but that Ford and Geely anticipate that a definitive sale agreement will be signed in the first quarter of 2010, with closing of the sale likely to occur in the second quarter 2010, subject to appropriate regulatory approvals.

The prospective sale would ensure Volvo has the resources, including the capital investment, necessary to further strengthen the business and build it’s global franchise, while enabling Ford to continue to focus on and implement it’s core ONE Ford strategy.

When asked about the intellectual property agreements Ford and Volvo have had in place for the last ten years a ford spokesperson said, “As in past divestiture agreements, our agreements with Geely take into account issues such as IP rights and protections and the engineering, manufacturing and supply relationship between Ford and Volvo.”

In a press release Geely addressed the issue of Volvo’s safety DNA, “Should a stock purchase agreement be finalised, Volvo will retain it’s leadership in safety and environmental technologies, and will be uniquely-positioned as a world leading premium brand to exploit opportunities in the fast growing China market.”

China being a fast growing market is an understatement. J.D. Powers just sent a note saying, “Chinas automotive market is hot, and will remain hot. The governments extension of automotive stimulus measures through 2010 is adding optimism to a market that has grown at a staggering pace in 2009.”

“Chinas light vehicle sales rose 46% year on year to 11.62 million unit’s in the first eleven months with demand jumping 94% in November setting a new record of 1.28 million unit’s. The strong China market in 2009 has given several Chinese companies the resources and the confidence to consider foreign acquisitions as a source of competitiveness.”

Geely said, “In recent weeks, Geely has also held constructive meetings with Volvo management, labour representatives and government officials in Sweden and Belgium “ where it’s key manufacturing plants are based. “Geely is committed to work with all stakeholders to complete the transaction in the best interest of all parties, ” said Li Shufu, Chairman of ZGH.”

While Ford would continue to cooperate with Volvo Cars in several areas after the possible sale, the company does not intend to retain a shareholding in the business post-sale.

It was reported by CNBC that the deal was worth $1.8 billion, a far cry from the $6.45 billion Ford purchased Volvo for in 1999.

From Geely’s press release:
About Zhejiang Geely Holding Group Co., Ltd.
Zhejiang Geely Holding Group Co. Ltd. was founded in 1986 with it’s headquarters in Hangzhou, China. Geely Holding Group and it’s associated companies have established operations that span the automotive value chain, from research, development and design to production, sales and servicing. They are a fully integrated independent auto manufacturer producing cars, engines and transmissions. Today, they are one of Chinas fastest growing automotive manufacturers, as well as the industrys leading privately held group.

J.D. Power cautions against Chinese companies thinking that buying part of a company means they will succeed.

Beijing Automotive Industry Corp (BAIC) agreed to acquire part of Saab assets including intellectual property to Saab 9-3 and 9-5 models and equipment to produce those models from General Motors.

Geely Group was named Fords preferred bidder for Volvo Car and aims to conclude the purchase in February 2010. At the same time, Sichuan Tengzhong Heavy Industrial Machinery is awaiting government approval for it’s proposed acquisition of Hummer.

Acquiring foreign companies or their assets only get Chinese companies to a starting point. They will face immense challenges in the attempt to fully integrate the acquired companies and leverage their capability particularly with their lack of experience. The failure of Shanghai Automotive Industry Corps acquisition of Koreas Ssangyong Motor serves as a cautionary tale.

Top China groups by Volume Share
1 SAIC 2,322,524 20%
2 Chang’an 1,631,113 14%
3 FAW 1,586,966 14%
4 DFM 1,541,495 13%
5 BAIC 1,046,166 9%
6 Guangzhou 547,778 5%
7 Chery 436,336 4%
8 BYD 384,947 3%
9 Brilliance 316,925 3%
10 Geely

By | 2017-03-22T08:05:32+00:00 December 23rd, 2009|Categories: Automobiles and Energy, Ford, Manufacturers, Radio, The John Batchelor show|Tags: , , , , , |0 Comments

About the Author:

Lou Ann Hammond is the CEO of Carlist and Driving the Nation. She is the co-host of Real Wheels Washington Post carchat every Friday morning and is the Automotive, energy correspondent for The John Batchelor Show and a Contributor to Automotive Electronics magazine headquartered in Korea. Hammond is a member of the North American Car and Truck of the Year (NACTOY), Women's World Car of the Year (WWCOTY), and the Concept Car of the Year.