By on June 17, 2009

The usually quite reliable Chinacartimes has it from the not always reliable auto.sohu.com that Ford and Geely have reached a deal for Volvo. According to Sohu, the Chinese-owned Volvo will put a production line into Dongguan City in Guangdong Province, one of China’s rustbelts. Supposedly, the first Geely owned Volvo is a XC90 SUV.

As BS lacks the necessary puthongua, Ms. Zhang, my trusted Chinese adjutant, translated the Sohu report as follows:

The rumor might finally become true. Geely has signed a letter of intent with Volvo about buying Volvo. The new Volvo will land in Dongguan. The first car type made in China will be the XC. Both parties will have more negotiations about employee reductions, product range, technology transfer. Experts say that Geely should focus on how to operate the Volvo brand once purchased.

In 1999, Ford spent $6.49 billion for Volvo. It was their attempt to enter the high-end market of Europe. However, Volvo always ran at a loss. According to some analysts, the market value of Volvo is already less than $3b. The actual purchase price might be lower than $1.5 billion.

Experts say, Ford cannot sustain the losses by Volvo. Ford is trying hard to survive itself in a competitive landscape. Ford has no energy left for Volvo. In the economic crisis, GM and Chrysler received a new lease on life through bankruptcy. Ford wants to do something similar: Sell Volvo to gain some urgently needed cash.

A reporter who contacted top management of Geely heard that Geely indeed had close contacts with Volvo regarding this matter. Geely has also conducted a large amount of market research. The new Volvo project will land in Dongguan, where it already has been approved by local government. Geely expects a loan guarantee of RMB8b ($1.17 billion).

The XC90 will be the first car type. The price of the China made XC90 should be reduced by 40 percent. If everything goes smoothly, the project will be ready for use on 2010 or 2011.

Things are murky, and the official wire services are silent. A “local government” approval won’t do. In China, if a deal costs more than $100 million, then it needs to be approved by the central government. If it is below $100 million, a permit from the provincial government is required. The State Administration of Foreign Exchange also looks at all overseas investments by Chinese companies.

We will follow the story and keep you posted as things develop.

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20 Comments on “Chinese Media: Volvo Bought By Geely...”


  • avatar
    Lokkii

    With apologies to Cat Stevens “Longer boats are coming to get us” – A song about Viking pirates. Ironic that Chinese pirates are taking Volvo from the the sons of those Swedes, no?

    Chinese boats are comin’ for Volvo.
    They’re comin’ for Volvo.
    They’re comin’ for Volvo.
    Chinese boats are comin’ for Volvo.
    Hold on to the shore.
    They’ll be takin’ your car keys from the door.

    I don’t want no Chinese car on my lawn;
    Just an old 240D I can nurse along,
    ‘Cause nobody knows
    How many miles a Chinese Volvo goes
    Oh..
    How many miles a Chinese Volvo goes.

    Chinese boats are comin’ for Volvo.
    They’re comin’ for Volvo.
    They’re comin’ for Volvo.
    Chinese boats are comin’ for Volvo.
    Hold on to the shore.
    They’ll be takin’ your car keys from the door.

  • avatar
    sitting@home

    Interesting. A brand renown for building cars that could survive a demolition derby with a couple of Sherman tanks will be made in a country renown for building cars that spontaneously disintegrate when a fly hits the windscreen.

  • avatar
    superbadd75

    So there goes the basis for all of Ford’s new products. Much like GM dumping Opel, I don’t quite understand.

  • avatar
    John Horner

    “The price of the China made XC90 should be reduced by 40 percent.”

    Drop Volvo retail prices while maintaining or improving quality and reliability and you will have a runaway best seller. Few people will care about the country of origin. The current Volvo S80 or XC90 starts at about $40k. 40% off would mean $24k, deep in the heart of the family sedan and SUV markets. Now build a $24k minivan off the same platform and watch Toyota and Honda scream with pain.

    Ford is going to regret this decision.

  • avatar
    ponchoman49

    Well thats one more car line to take off my ever shorter list.

  • avatar
    TonyJZX

    i think it’s a bit premature to say that all volvos will now be made in china and 40% less

    no-one not even the chinese want to erode whatever brand value volvo has

    i don’t see volvo ever playing down in the dirt with the likes of toyota and gm/chev/ford

  • avatar
    shaker

    When they calculate how much cost is involved with engineering all of the safety out of a Volvo, the price advantage may evaporate.

  • avatar
    Guzzi

    NA luxury buyers have already eliminated Volvo from their list, in favor of BMW, Audi and Lexus. For the well-heeled American auto buyer, “safety” and “Chinese” is a rough juxtaposition. Geely will have a lot of marketing work to do. Anyone cross-shopping other brands will hear from that other brand’s salesman that Volvos are now Chinese. Even going downmarket, there is not enough room in the NA market for Volvo to work anymore as a Swedish brand/Ford subsidiary, let alone a Chinese-owned brand. Basically, a Volvo is not what it used to be. But maybe the Chinese will go apeshit over them, a la Buick.

    What’s weird is that if I had to put money on a Swedish brand last year, it wouldn’t have been Saab. But now I’m more curious about them and their future. Actually if I were to put money on a Swedish car, it would be a 1998 or earlier S/V90 or 9/7/26/40.

  • avatar
    John Horner

    US customers for Chinese built Volvos would be the people who shop at Kohl’s and Target.

    The majority of US consumers do not care where something was made. They may say they care, but the data tells us that what people say and what they do are often very different things.

    Volvo went off the rails when they tried to become a luxury brand.

  • avatar
    wsn

    John Horner :
    June 17th, 2009 at 10:49 am

    “The price of the China made XC90 should be reduced by 40 percent.”

    Drop Volvo retail prices while maintaining or improving quality and reliability and you will have a runaway best seller.

    ——————————————

    I believe the 40% are referring to the expected price drop in China. It won’t materialize in the US.

    When Japanese made Camries were imported to China, each would cost 400k RMB (roughly $60k USD). When Toyota started to build Camries in China, each costs about 250k RMB (roughly $35k USD).

    So, even a 40% reduced Chinese Volvo would be too expensive for Americans at this exchange rate.

    And yes, the Chinese dollar (RMB) is artificially over valued, because their domestic heavy industry capability is severely lacking. The popular belief that RMB is artificially under valued applies to labor intensive products only.

  • avatar
    redrum

    no-one not even the chinese want to erode whatever brand value volvo has

    Agreed. If they wanted to get their foot in the American market as a “value leader”, they would’ve made an offer for Saturn or Pontiac.

    Buying Volvo is a quick way to get into the world market with a respected name plate. It’d be crazy to buy it and then try to reinvent it.

  • avatar
    Lokkii

    Volvo went off the rails when they tried to become a luxury brand.

    Well, the problem for Volvo nowadays is:

    Who IS Volvo?
    The Swedish car company? Not so much.
    The Safety car company? Don’t hear much about that.
    The durability car company? Don’t hear much about that either.
    The northerner’s bad-weather luxury car? Nope. Haven’t heard that angle.

    There are many things Volvo COULD be.

    However, I don’t think the Chinese ownership will do much for the Swedish, safety, durability or luxury memes. Lowering the price isn’t going to help them in those areas either.

    The CHEAP northerner’s durable safety luxury car?

    What IS their new image?

    EDIT:

    By the way, I think that Volvo would be of most use to the Chinese in China, when they would have use of the ‘Volvo mythology’ unencumbered by history, just as they are using the ‘Buick mythology’ to sell cars there.

    If they are buying, the U.S. market will only be a sideline market for them.

  • avatar
    postjosh

    just heard mulally live on bloomberg radio. he said volvo is for sale but he wouldn’t be more specific and he certainly didn’t indicate that a sale was imminent.

  • avatar
    GS650G

    Volvo helped Ford make better cars, selling the brand would be a mistake, especially to the Chinese.

    The last thing American car companies want to do is aid the Chinese in developing car manufacturing. In 10 years they’ll own the market.

  • avatar
    TonyJZX

    i think the Chinese do have some love or ‘affinity’ for the volvo brand

    eg. many Chinese white collar professionals had sorta wanted a volvo but had graduated to Mercedes

    Volvo like Saab need to celebrate their Swedish-ness… where I am BMW/Audi/Merc have elevated themselves to the stratosphere so a basic Volvo sedan is like the price equivalent of a higher end quasi luxury GM or Ford.

    I don’t know what their plan is but I believe that Volvo pricing themselves like luxury Cadillac type vehicle is not out of the bounds of reality.

    I’m just not a fan of German style repair, servicing and parts nor FWDs and SUVs.

  • avatar
    pb35

    If this goes through I guess my 2007 XC90 will be my first (and last) Volvo. Maybe I’ll go back to a USA product. I haven’t bought a new American car since 1996.

  • avatar
    Demetri

    Does this mean that I’ll be able to get a better deal on a C30? I really like it, but it costs more than a Speed3, which is actually on the same base platform, but has way more power and handling.

  • avatar
    Geo. Levecque

    What you can say about Volvo is that after Five years they are more expensive to repair than other makes, they also have a lot of other problems that seem to dominate most European vehicles, ie Electrical problems.
    One thing I liked about the old 240 Wagon is that it had a double floor, something un heard of then and probably we won’t see it again either!

  • avatar
    eggsalad

    Geo. Levecque :

    What is this “double floor” to which you refer? I still drive a 240, I’ve had several, and each one only had one floor.

  • avatar
    clint879

    The article and the post sound like it is a done deal, it looked as if the swedish press is not viewing it that way. How is this all going to end up playing out?
    The consortium Crown now makes a request to Ford to be let in to proper negotiations to acquire Volvo Cars. “We offer a better alternative for Volvo Cars and its employees than Geely. Ford should, at the earliest possible date, allow Crown to participate in the negotiations”, says Roger Holtback, previous CEO for Volvo Cars and advisor to Crown.


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