Ford confirms sale of Volvo brand to Chinese car maker
28 March 2010

Ford has entered into a definitive agreement to sell Volvo and related assets to Zhejiang Geely Holding Group in a $1.8 billion deal ((£1.2bn), it has been announced.

Following the agreement, the sale is expected to close in the third quarter of 2010. The deal will take so long to close because of the number of approvals required from governments and organisations around the world to clear the deal.

Geely will own Volvo outright, with Ford retaining no shareholding in the company. Ford paid £4.34bn for Volvo when it bought it in 1999, and Volvo has not made a profit for the company since 2005. Geely, founded in 1986, is China's tenth largest car maker.

Hilton Holloway blog - Volvo: China takes its first premium league western automotive scalp

A brief history of Volvo

However, Ford will continue to supply Volvo with powertrains, stampings and other vehicle components for unspecified periods. As part of the sale, Ford also has committed to provide engineering support, information technology, access to tooling for common components, and other selected services for an unspecified transition period.

Ford and Geely have also established protocol agreements to govern the use of intellectual property; these agreements will also allow Volvo to grant sublicenses to certain portions of Ford’s intellectual property used by Volvo to third parties, including Geely. The IP deals are expected to last the length of Volvo's current product cycle.

All but $200 million - which will be paid at a later date - of the purchase price will be paid in cash. . Ford also noted in its official statement that the final price Geely pays will be subject to a final investigation into Volvo's financial status at the time of the completion, with items such as pension obligations potentially altering the final payment price.

“Volvo is a great brand with an excellent product line-up. This agreement provides a solid foundation for Volvo to continue to build its business under Geely’s ownership,” said Alan Mulally, Ford’s president and CEO in a statement.

“At the same time, the sale of Volvo will allow us to further sharpen our focus on building the Ford brand around the world.”

Geely Chairman Li Shufu travelled to Sweden on Friday to finalise the deal, which reports suggest will be funded by financing from banks in China, the USA and Europe, including low-interest loans guaranteed by the governments of Sweden and Belgium.

Geely's Hong Kong-listed unit, Geely Automobile Holdings Ltd., and some Chinese local governments will also invest in the deal, according to unconfirmed reports.

Shufu said: "We are pleased to have reached this agreement with Ford, enabling us to safeguard and strengthen Volvo's renowned brand heritage. This transaction will ensure Volvo's continued leadership in the premium segment, where it enjoys a global reputation for safety and environmental-friendly technologies.

"This famous Swedish premium brand will remain true to its core values of safety, quality, environmental care and modern Scandinavian design. As part of the proposed transaction, Zhejiang Geely Holdings will maintain the strong collaborative relationships that Volvo has built with employees, unions, suppliers, dealers and above all, customers.

"On completion, Volvo Cars will be a separate company with its own management team based in Gothenburg, Sweden, and a new board of directors."

Geely also confirmed Stephen Odell, Volvo's CEO, will remain in his current position. Shufu said: "We have high regard for the current team, and believe this team will deliver for Volvo."

Shufu also said that manufacturing will continue in Sweden and Belgium in the long-term, dismissing talk it would transfer to China. "We want to be close to our supplier chain and markets," he said, speaking of the "unliberated" potential of the company that drew him to the purchase. "It is our intention to remain in Gothenburg in the long-term."

He did say that Volvo would expand its operations in China, however, but declined to outline the extent of his plans beyond saying that Geely's sales network could provide a huge platform from which to sell cars. Reports suggest one of Geely's first moves will be to build a plant with the capacity to build 300,000 cars in China.

Shufu said: "China, the largest car market in the world, will become Volvo's second home market. Volvo will be uniquely positioned as a world-leading premium brand, tapping into the opportunities in the fast-growing China market."

Geely believes Volvo has the potential to sell 200,000 cars a year in China immediately. The company wants to use Volvo's manufacturing capacity fully in Europe, which would mean selling 600,000 vehicles there and in North America.

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Comments
11

28 March 2010

I will be interested to see how Geely will manage Volvo. If Ford, one of the biggest auto manufacturers in the world with plenty of experience in all world auto markets cant manage it. I really struggle to see how these chinese manufacturers with no experience outside of their domestic market are going to manage a global brand.

28 March 2010

My hope is that Geely adopt the same philosophy as Spyker appears to have with Saab and let Volvo find it’s true identity again. Volvo needs to return to what it does best – making large estate cars. Geely need to let the Volvo engineers sort out the cars dire handling issues. The last V70 that I drove was absolutely awful on the A and B roads here in Gloucestershire and could not go in a straight line even on the M5! Dr Weenedonpetrol prescribes a course of handling exercises and developments in the rear department.

28 March 2010

Disaster.

Ford, unfortunately, have shown some of the weakest management there has been for the former PAG. Aston Marton, Jaguar, Land Rover, and Volvo was a terrific portfolio which should have been able to take on the likes of BMW, Audi and Mercedes with ease.

Any sale like this to the Chinese will come back and haunt the entire automotive industry. Especially the part where they'll be allows to sub-sale Ford's technology to other companies!

The Chinese are not daft - they showed that with the Phoenix Four and Rover!

29 March 2010

I have invented a way to make vehicles lighter and safer at the same time. In a few weeks, I will be granted a US patent. The idea is free to use outside of the USA.
The patent application document has a link on my website- www.safersmallcars.com

US Government fuel economy requirements (CAFE) will force cars to become lighter since weight is a big factor in fuel economy.
Lighter cars are probably going to be smaller cars because there is no cost effective alternative to steel. The easiest way to get weight down is to remove steel.
Removing steel to lighten cars is a bad idea because steel is an excellent absorber of collision energy.

The collision death rate of micro vehicles is double that of mid size vehicles.

China is probably my best hope for getting an auto company to consider my invention. American and Euro countries don't take ideas from the outside.

29 March 2010

fhp11, The same could have been said back in the late 90's about the purchase of Lotus by Proton, a Government backed Company with limited experience doing Proton small car exports. As you can see what Proton did for Lotus - the Evora, new Elise and now the Lotus-Cosworth F1 team. Not too back in my books. Geely are yes a large Chinese domestic car producer. However what I imagine they will do like Proton is largely leave the subsidiary alone and get it's independent management to do its own thing and re-establish the "Volvo Way". Injecting the parent company DNA into a subsidiary is not always a good thing (i.e. GM and Saab) if the cultures are totally different. Geely I believe is really aiming towards more about knowledge transfer of the Volvo manufacturing and R&D process. They want to grow their own brand with Volvo technology playing a part while also selling Volvos internationally. So really, unlike Ford trying to dominate Volvo, Geely are just an observer with a lot of Chinese cash. Not without it's teething problems (culture and language), I think Volvo may be back in vogue very soon!

29 March 2010

People slating Fords handling of PAG is so wrong, they took Aston Martin a company with no future, a tired and out of date product line and invested millions, they now have a future and are making great modern cars. The same could be said for Jaguar and Landrover. Those three marques alone have done seriously well out of Fords investment and probably would not the product line up they have now without it, and may not even exist without it. Volvo have gone from making safe boxes to making good looking (IMO) cars without ignoring their core value value of safety, OK so they dont handle or ride as well as they could, but neither do the current range of Audi, BMW and Mercedes. I agree they need to move back to producing the massive estate cars they where known for as think this will be the next growth segment as people eventually realise that an SUV is not the answer.

29 March 2010

[quote Symanski]

Disaster.

Any sale like this to the Chinese will come back and haunt the entire automotive industry. Especially the part where they'll be allows to sub-sale Ford's technology to other companies!

[/quote]

Regarding the technology, i think you will find more Volvo techology in Ford cars, than Ford technology in Volvo cars.

29 March 2010

[quote Citytiger]Volvo have gone from making safe boxes to making good looking (IMO) cars without ignoring their core value value of safety[/quote]

Volvo built the P1800, 850, C70, S60 and S80 all before Ford swallowed them up and spat them out again. Their product range today after Ford's involvement is not a patch on what it was in the 1990's. They were showing a lot more promise as a premium car manufacturer back then in my opinion.

29 March 2010

[quote shopa]

I have invented a way to make vehicles lighter and safer at the same time. In a few weeks, I will be granted a US patent. The idea is free to use outside of the USA.
The patent application document has a link on my website- www.safersmallcars.com

US Government fuel economy requirements (CAFE) will force cars to become lighter since weight is a big factor in fuel economy.
Lighter cars are probably going to be smaller cars because there is no cost effective alternative to steel. The easiest way to get weight down is to remove steel.
Removing steel to lighten cars is a bad idea because steel is an excellent absorber of collision energy.

The collision death rate of micro vehicles is double that of mid size vehicles.

China is probably my best hope for getting an auto company to consider my invention. American and Euro countries don't take ideas from the outside.

[/quote]

WTF has this got to do with Geely buying Volvo? (other than a spurious link to China)

Reported this morning that China has overtaken the States as the biggest car market, it grew by more than 50% over last year!!!

Let's be honest who had heard of Geely and SAIC before they got involved with European car producers? Like a previous post I hope they adopt a similar principal to that adopted by Spyker with SAAB.

29 March 2010

[quote shopa]

I have invented a way to make vehicles lighter and safer at the same time. In a few weeks, I will be granted a US patent. The idea is free to use outside of the USA.
The patent application document has a link on my website- www.safersmallcars.com

US Government fuel economy requirements (CAFE) will force cars to become lighter since weight is a big factor in fuel economy.
Lighter cars are probably going to be smaller cars because there is no cost effective alternative to steel. The easiest way to get weight down is to remove steel.
Removing steel to lighten cars is a bad idea because steel is an excellent absorber of collision energy.

The collision death rate of micro vehicles is double that of mid size vehicles.

China is probably my best hope for getting an auto company to consider my invention. American and Euro countries don't take ideas from the outside.

[/quote]

WTF has this got to do with Geely buying Volvo other than a spurious link to China?

China now the biggest world market for cars recently overtaking the States. it grew more than 50% in the last 12 months.

Lets hope (as a previous post points out) that Geely adopt the same principles as Spyker have with SAAB.

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