Did we say last Thursday that the sale of Volvo from Ford to Geely „could close as soon as next week?” Did I believe it? Did I live in Chine for six years? Honestly, there was an element of surprise when, this Beijing afternoon, my inbox made that noise and there was an email from Ford, titled “Ford Motor Company Completes Sale of Volvo to Geely.” The deal is closed. Volvo is Chinese.
Today, Geely gave Ford $1.3b in cash and a promissory note to pay another $200m. Wait a minute, says the dedicated follower of the Volvo-Ford-Geely drama, wasn’t the purchase price $1.8b? Ford’s press release explains: “The total purchase price for Volvo and related assets set forth in the agreement signed in March 2010 was $1.8 billion, including a $200 million note and the balance in cash, with the cash portion subject to customary purchase price adjustments at closing.” Well, anyone who has ever sold a house can sympathize with those “customary purchase price adjustments at closing.”
Apparently, there was some haggling over $300m, and it might continue for a while. Says Ford: “The estimated purchase price adjustments used at closing are expected to be finalized and settled following final true-up of the purchase price adjustments later this year. The final true-up is expected to result in additional proceeds to Ford.” From the sound of it, they don’t expect a whole lot more “true-up”. The Chinese are masters of last minute bargaining, and they won.
There is no reason to haggle too hard, because Ford can make a nice business out of this on the back-end. They are now a supplier of critical parts to Volvo and Geely. Ford will supply Volvo with, “powertrains, stampings and other vehicle components. Ford also has committed to provide engineering support, information technology, access to tooling for common components, and other selected services for a transition period.” That can cost a pretty penny.
As far as personnel is concerned, Ford is only mentioning those who won’t go to China: “Stephen Odell, CEO of Volvo Car Corporation, is returning to Ford as group vice president and Chairman and CEO of Ford Europe. Stuart Rowley, CFO of Volvo Cars, is returning to Ford as chief financial officer, Ford Europe.”
No word about Hans Olov Olsson, former Volvo president, who will be vice chairman of Volvo, or of Stefan Jacoby, formerly head of Volkswagen of America, who will (if the rumors are true, and still current) be CEO of the Chinese-owned Volvo. That’s Volvo’s business, and has no place in the announcement of Ford.
But there’s word from the head of Sweden’s IF Metall union, Stefan Lofven. He likes the deal now: “Volvo will have a management and governance of large industrial and international expertise. With production, research and development and headquarters remaining in Sweden, while China is the biggest growth market for the automotive industry, we hope for positive employment effects,” said Lofven to the Wall Street Journal. He’ll travel to China in a few months to meet the new bosses.
They’ll probably show him the plans for a new Volvo plant in China. “When you look at the car industry in China, if you want to be even a 2 percent player there — and 2 percent is not a bad aspiration — you have to have local manufacturing,” said outgoing Stephen Odell to Bloomberg last week. “It’s clear Volvo needs more capacity to grow.”