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.
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.