Geely agrees to buy Volvo from Ford for $1.8 billion

Geely agrees to buy Volvo from Ford for $1.8 billion
Automotive News -- March 28, 2010 - 12:01 am ET UPDATED: 3/28/10, 12:51 a.m. ET
GOTHENBURG, Sweden (Reuters) -- Zhejiang Geely Holding Group, China's
largest private-run automaker, agreed on Sunday to buy Ford Motor's Volvo car unit for $1.8 billion, the country's biggest overseas auto purchase.
The takeover underscores China's arrival as a major force in the global auto industry and ends nearly two years of talks with Geely over Volvo -- the last sale from Ford's former premier group, which also held Aston Martin, Jaguar and Land Rover.
"Today represents a milestone in the history of Geely," Geely chairman Li Shufu told a news conference, adding that Volvo Cars would remain a separate company with its own management team based in Sweden.
Such a deal would have been nearly unimaginable a few years ago for the Chinese carmaker, which on 2009 forecasts has a turnover of only 16 percent of Volvo's, and has just over half the workforce.
The deal highlights in particular the big opportunities that have emerged from the financial crisis for smaller players. Tiny Dutch sports car maker Spyker clinched a deal in January to buy Sweden's Saab from General Motors Co.
Geely said it had secured all the necessary financing to complete the deal, though it remained open to a possible loan from the European Investment Bank. The mostly-cash deal includes agreements on intellectual property rights, supply, and research and development arrangements between Ford, Volvo and Geely.
Addressing questions regarding Geely's plans to keep production lines running in Europe, Li said it was important Volvo stayed close to key supply centers.
"I have a deep belief that the manufacturing footprint in Gothenburg and Belgium will be preserved in the longer term," he said.
Volvo labor unions, which had been critical of the proposed deal and complained about a lack of information about the future of the company, said they now backed the takeover.
A 'fair price'
The deal, which both sides aim to close in the third quarter, will help free up cash for the number two U.S. automaker and enable it to focus on its core Ford brand.
Geely, parent of Geely Automobile Holdings, was named by Ford as the preferred bidder for its loss-making Swedish unit in October 2009.
The Chinese carmaker clinched Volvo at a price tag well below the $6.5 billion Ford paid for it in 1999.
"We think it's a fair price for a good business," Ford Motor's Chief Financial Officer Lewis Booth told the news conference.
China raced past the U.S. to become the world's top auto market last year, with sales surging 46 percent to a record 13.6 million units. It is keen to move into Western markets but has so far lacked the technology and brand recognition to do so.
The Volvo deal should help the Chinese carmaker to get around some of those obstacles more quickly.
Beijing boost
Geely's chairman is already planning a factory in Beijing which will make 300,000 Volvo branded cars, or as many Volvos for China as are now made abroad for foreigners.
Unlike General Motors' failed deal to sell its gas-guzzling Hummer brand to Tengzhong, a little known Chinese machinery maker, Geely's Volvo purchase has been backed by Beijing.
Said Li: "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."
Made-in-China Volvo may get a boost from Beijing's plan to support domestic brands and replace Volkswagen AG's Audi A6 as Chinese state officials' car of choice.
"We want to stabilise and enhance the traditional markets in Europe and North America, and at the same time develop the other Volvo business in emerging markets, including China," Li said.
The carmaker has already announced an aggressive target of boosting its sales to 2 million vehicles by 2015 from last year's roughly 330,000 units -- about the same as Volvo's global output.
Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100328/COPY01/303279991/-1#ixzz0jVUw3mvK
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
I figure Ford blew at least 5 billion dollars on Volvo. I'll bet they wish they had that back, along with the billions they blew on Jaguar and Land Rover.
If I was running BMW or Daimler, I would have tried to outbid Greely. If I was running one of those companies, the last thing I would want to see in Europe is a Chinese financed competitor.
I wonder how Ford worked out the component sharing arrangements? Some European Fords use "Volvo" engines and I am sure some Volvos use "Ford" bits.
Ed

http://www.autonews.com/apps/pbcs.dll/article?AID=/20100328/COPY01/303279991/-1#ixzz0jVUw3mvK
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
My first guess would be that Geely purchased Volvo to get at the technology... knowledge is both valuable and powerful and this way I can see the parent company not having to re-invent the wheel so to speak...
We would have no way of knowing how much actual Ford proprietary knowledge they might get along with the deal, but I'm pretty sure that the Chinese will save millions in research costs anyway (this could possibly give them the technology they'd need to enter the North American market).
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Motorsforum.com is a website by car enthusiasts for car enthusiasts. It is not affiliated with any of the car or spare part manufacturers or car dealers discussed here. All logos and trade names are the property of their respective owners.