By on December 8, 2008

The phone lines are running hot between Detroit and Shanghai. Ford is in talks with SAIC, China’s biggest car-maker, in what UK’s Times calls a “desperate attempt to sell its prestigious Volvo brand.” Ford has already tried before, and had been turned down by the Chinese. The Times quotes “a source close to the American motor giant” who says that earlier talks, which took place in summer, broke down over price. Ford had bought Volvo for $6.5b in 1999, and wanted to clear $5.9b. “Mei xi” (no dice) said the Chinese. The Detroit source that’s leaking to the Times (probably with a nod from higher up) says: “Now that Ford is in dire straits this would be a good opportunity for SAIC to snap up Volvo on the cheap. The price has dropped considerably since seeking a sale in the summer.”

According to Aaron Bragman, a car industry analyst with economic forecaster IHS Global Insight, “the sale of Volvo has become part of the conditions of Government assistance.” Ford is being advised by the investment bank JPMorgan Chase.

A spokesman for Ford confirmed that the company is in talks “with a Chinese car-maker,” but declined to name SAIC. SAIC likewise declined to comment. There are other suitors, just to keep SAIC from thinking they are the only game in town …

According to the rumor mill, Ford is also in talks with other potential bidders for Volvo, such as Tata, Dongfeng, Hyundai Motor, and equity firms such as Texas Pacific Group.

The private equity groups are widely seen as an intermediate step for chopping up the formerly Swedish car maker and then selling it (whole or in parts) to interested parties. The Chinese would be most interested in the brand, in the design, and in production know how. What all Chinese makers are interested in is an accepted foreign brand that eases their entry into the export market. Volvo with its safety cachet would be an ideal first step. The urgent deal between SAIC and Ford also explains the suave reaction of Changan, Ford’s joint venture partner in China. If the deal is consummated, Changan could sell their Ford operation to SAIC, or SAIC could swallow the whole Changan kit and caboodle.

SAIC is in joint ventures with Volkswagen and GM. The Chinese don’t see a problem in having competitors under one roof. Hyundai recently said that they are not interested in any foreign deals at all. Tata has their own problems. Dongfeng is in talks with GM. You can bet that Washington has given GM similar marching orders, and told them to get on with off-loading Saturn, Saab and possibly others if they want to see real government money.

“At a time when much of the world economy seems to be screeching to a halt, China appears likely to remain a rare oasis of healthy growth,” writes the Nikkei. The Tokyo business paper is not known for over-hyping China. “The Chinese government has aggressively responded to the global economic downturn by announcing a series of massive public investment plans. The stock market has also rebounded 20% from its low at the end of October.”

Prepare yourself for what TTAC has said for quite a while: There will be a major sell-out of brands held by the D2.8, and the likely buyers will be in China. The crazy part is that the US government apparently is ordering Detroit to do so. Selling off brands for cheap is the price of doing the begging in DC.

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25 Comments on “Confirmed: Ford Wants To Sell Volvo To China Real Fast...”


  • avatar
    Droid800

    I don’t think they’re encouraging sales to China, per se, but they’re not doing anything to prevent it either.

    Ford should aim for at least $2.4 billion to recoup the write-down that they incurred earlier this year because Volvo was sucking wind. If they can get more, fine, but that should at least be their starting point. I’d like to see Hyundai buy Volvo, to be honest. Even though SAIC is one of the better Chinese automakers, they still haven’t shown much in the way of being skilled at running a company like Volvo. Hyundai at least knows how to do things right, and already has a good grasp of the variety of markets throughout the world.

    Something just dawned on me as well; with the sale of Volvo, the entire legacy of Jacques Nasser will have been dismantled. None of the cockamamie organizations that he built up (PAG, etc) will be left.

  • avatar
    Qusus

    Can anyone who speaks Chinese tell me what “mei xi” means? I know a little bit… and I’m pretty sure that doesn’t mean “no dice” or even some approximation of that. It seems like the phrase here would be “bu neng”? I could be wrong here, but I’m fairly sure I am not.

  • avatar
    wsn

    “Mei” means “non-existent”; “xi” means “drama” or “opera”. Together, they mean “highly unlikely” or “impossible”.

  • avatar

    Mei xi: WSN is right, it means “no game” … forgetabout it. It’s what you tell the other side when they are way outside the ballpark. In America, it’s “no dice.” Don’t use Google to translate Chinese …. WSN gets high grades from the Mandarin speakers at the office. “Bu neng” means “cannot,” but you cannot use it as a single sentence.

    @Droid: Not skilled at running a company like Volvo? SAIC has started Chinese mass motorization with VW more than 20 years ago. Their JV with GM runs excellent. If someone can make tons of money selling Buicks, he’s a genius in my book.

    All: The only companies for which buying the likes of Volvo, Saab, Saturn et al would make sense are in China, and maybe in India. India is in trouble. Tata is a steel company, and steel is in the toilet. Prices at 1994 levels. Tata is in deep doodoo: http://profit.ndtv.com/2008/12/05004404/2008-A-year-Tata-would-like-t.html The only place where they have money is in China. They desperately need an established brand to successfully export their cars. North America and Europe don’t let Chinese brands in. They have worked with the Chinese for ages, they know what they can do. They sold them their technology. They trained them in building the identical cars as in NA and EU. If SAIC buys Volvo, they can export Volvos the next day. The cars have certification in the US and Europe. Same for the other brands. Would you buy a Mexican car? You do, when it says Chevy,Ford, Nissan, Toyota, Honda, or Volkswagen on it.

    Big picture: In the long run, China wants its JV partners out. Can’t nationalize them, this ain’t Russia or Nicaragua. When they are as cheap as they are now, only an idiot wouldn’t buy them.

  • avatar
    mel23

    with the sale of Volvo, the entire legacy of Jacques Nasser will have been dismantled. None of the cockamamie organizations that he built up (PAG, etc) will be left.

    Nasser was what he was, and he was just an employee. The real responsibility rests with Bill Ford Sr. and Jr. From what I’ve read it was Sr. who was strong for the disastrous foray into the upscale foreign crap. Where might Ford be today without the waste of billions and diversion of attention from their core brands?

  • avatar
    Ingvar

    There was nothing fundamentally wrong with the PAG-group. It just didn’t work as planned. Perhaps the biggest problem was Fords lack of focus and lack of investments?

  • avatar
    Runfromcheney

    mel23:
    “Where might Ford be today without the waste of billions and diversion of attention from their core brands?”

    Easy. They wouldn’t be in this mess. It was when Nasser went on a crazed spending spree buying up European luxury brands and stock in dot-com companies that lead to Ford falling into its sea of red ink. When the dot-com bubble burst, so did Ford.

    Believe it or not, I think that Nasser was a worse leader than Rick Wagoner.

  • avatar

    @Ingvar :
    December 8th, 2008 at 6:50 am

    There was nothing fundamentally wrong with the PAG-group. It just didn’t work as planned.

    There was nothing fundamentally wrong with the Maginot-Line. It just didn’t work as planned. Sorry, Ingvar, the idea may have been worthy, but that matters little if the execution is asshat.

  • avatar
    joulof

    “The Chinese would be most interested in the brand, in the design, and in production know how.”

    Who owns the brand Volvo? Can it be sold by Ford if a Swedish truck maker owns the brand? Or is Ford only a licensee of the brand name?
    And what is the value of Volvo without the brand name?

    (SAAB is also a Swedish company not directly related to the GM licensed car manufacturing part)

  • avatar
    Ingvar

    So, tell me then, what was wrong with the PAG-group? And what was wrong with the execution of it?

    As I see it, the problem was a lack of focus, brand dilution, and lack of investments. But the idea of an umbrella group for the premium brands wasn’t fundamentally wrong.

    Jaguar X-Type was a bad idea, wrongfully executed at that. The S-Type withered on the vine for far too long. The Aston Martin brand had to cut itself loose to gain money to develop the Rapide, because Ford didn’t want to spend the money. Land Rover LR3 was *this* close to become an Explorer clone. And Volvo has been giving it away to almost the entire mid-range line-up at Ford.

    Had Jaguar been stronger if the X-type hadn’t come true? Or if it had been better executed? Had Volvo been stronger if they had developed an S60 replacement some years ago? If Ford had stayed true to the idea of PAG, had the outcome been any different? Now we’ll never know…

  • avatar
    cleek

    Jacques Nasser recapitalized BMW when he could have bought them.

  • avatar

    @joulof: According to public records, the Volvo trademark belongs to:

    Volvo Trademark Holding Aktiebolag
    c/o AB Volvo, Göteborg, Sweden, 405 08

    That also applies to the all-important Class 14 (“Vehicles, including cars, vans, sport-utility vehicles (including golf carts), buses, trucks, tractor units/prime movers, on and off road vehicles/dump trucks and parts …”)

    Keep in mind that Volvo trucks and Volvo cars are separate, so they must share the mark. How, depends on the licensing agreement. A contract can be written that the license is assignable or non-assignable …

    One would think that with the Rolls-Royce and Rover debacles, people now are sufficiently sensitized to these issues and won’t again buy a car factory without the proper brand attached.

  • avatar
    John Horner

    Selling major brands and know-how to the Chinese may seem like a good play now, but long term it is a mistake. Doing so puts the last remaining required chess pieces quickly and firmly into the hands of challengers even more strategically threatening to the US and European based auto makers than the Japanese have been.

  • avatar
    lewissalem

    One positive of Ford ownership: Ford now builds the safest American cars. Thank you Volvo.

  • avatar
    mtymsi

    If I remember correctly, the clueless Bill Ford Jr. ousted Nasser shortly after taking over as CEO but wasn’t responsible for his hiring. Insofar as the completely clueless Bill Ford Sr., there was a reason his brother Henry II kept him out of any meaningful position within the company while the Duece ran it. Since the acquisition of the brands which comprised PAG, Ford has proven without a doubt they are totally inept at running any luxury car division. You need look no further than Lincoln for proof positive.

  • avatar

    Further digging has revealed that “Volvo Trademark Holding AB, holds trademarks for Volvo Car Corporation and AB Volvo.” (http://www.nic.uk/digitalAssets/8141_vovlo.pdf ) I think it is a fair assumption that the parties in question know what they are doing (at least trademark-wise) and that they have received proper counsel.

  • avatar
    Ingvar

    @Bertel:

    I think the deal was something like, anything bigger than vans goes to Volvo Trucks, anything smaller goes to Volvo Cars. Volvo Cars is now owned buy Ford, but could be sold. Therefore, it is most likely that the deal will continue as is, even with a new owner of Volvo Cars. Neither Ford nor Volvo Trucks would want that deal to change, and I think they would have to deal with that issue properly before Volvo Cars would be sold off.

  • avatar
    tom

    One would think that with the Rolls-Royce and Rover debacles, people now are sufficiently sensitized to these issues and won’t again buy a car factory without the proper brand attached.

    I’ve read, that even Jürgen Schrempp called BMW headquarters in order to congratulate them on the deal and for sticking it for Volkswagen.

    I guess this also shows that Stuttgart hates Wolfsburg more than Munich…maybe there is a future for a BMW/Mercedes alliance after all ;)

  • avatar
    Dr Lemming

    I hope this rumor doesn’t pan out and Volvo is sold to a European entity.

    It’s easy to retrospectively quarterback Ford’s buying spree, but I’d agree that it was a fundamentally flawed idea. Ford was trying to emulate GM. As Toyota and Honda have subsequently shown, you don’t need to buy a bunch of brands to make inroads in the premium markets — you need good products. Ford instead bought a whole lot of distracting problems.

    If one wants to pinpoint a key implementation mistake, I would say that it was Ford’s vastly overambitious sale targets for PAG. This was most apparent with the X Type. Even if that car had more exclusivity Ford had no hope of coming anywhere close to achieving its aggressive sales targets. Ford’s lack of patience killed its aspirations. Again, Toyota and Honda didn’t make that mistake. They grew their luxury brands in a more orderly way.

  • avatar
    bill h.

    There seem to be other reports out there that the Swedish Gov’t may be ready to offer loan guarantees for both Volvo and Saab. ‘Twill be interesting to see how all this works out, especially if figures I’ve seen are true that both car companies account for about a sixth of Sweden’s total exports (hence their interest in seeing something other than a sale and liquidation?).

  • avatar
    Stu Sidoti

    From my understanding as someone who worked on several canceled PAG programs was this: The billions spent on the Firestone-Explorer rollover cases canceled several beautiful Lincoln projects, ended the production hopes of the Ford 49, several stunning Jaguars, and dissolved many other very compelling PAG programs. Many people have forgotten about that case, but that case sucked up billions of R&D dollars over a 5-year period. Once that money was allocated for litigation and such, Ford was forced to make very ‘safe’ somewhat boring decisions about the PAG offerings. Ford had some very ambitious, well-thought-out plans for Lincoln and then had all of the money pulled out from under them. Ford had put together some of the world’s best luxury-brand minds and recruited some of the best designers to revamp Lincoln such as Wolfgang Reitzle, J.C. Mays, Gerry McGovern, Chris Bird, Ian Callum, Maury Callum and many others in a strategy to return Lincoln to world prominence…Once the money ran out, so did the plans.

    PAG and the acquisition of so many of those brands was simply a play to increase margins. Volvo, Jaguar, Range Rover, Aston Martin all should have made big profit margins for them but when you don’t have any money to re-invest in these companies, you eventually find yourself making compromise decisions that lead to mediocre products instead of inventive, ground-breaking automobiles.

    I believe that if the Firestone-Explorer rollover cases had never occurred, and we had the generally strong, robust economy we had during the 90’s, the PAG strategy could have worked. Ford would have made huge profit margins on the PAG brands if only they could have spent more money on PAG R&D…Lincoln would be thought of much like you think of Cadillac today, probably with even more brand cache’. It was a real shame, some of those cars would have been great.

  • avatar

    @tom I guess this also shows that Stuttgart hates Wolfsburg more than Munich…maybe there is a future for a BMW/Mercedes alliance after all Oh, jeez, no. Daimler was happy because Rolls is not viable without Bentley. VW owning Bentley without the Rolls cachet, and BMW ending up with Roll without the “volume model” (so to speak) Bentleys made Daimler happy.

  • avatar
    tom

    Bertel, I was kidding…

    I still find it funny though that VW didn’t check the small print on what exactly they were buying…

  • avatar
    Orian

    Stu,

    Had Ford engineered the Explorer properly and not encouraged the under inflation of the tires they would not have had that problem. It is mismanagement like this that has cost them a lot of money and credibility with consumers.

    They’re still replacing the prone-to-spontaneous combusting cruise control units in their trucks – that’s not safe to me. I do not equate Ford cars or trucks as safer than their domestic competition or anything foreign for that matter. And there’s the issue with the fuel tanks in the Grand Marquis/Crown Vic that they refused to fix but would rather sell you an upgrade for safety that is well known now.

    Ford has mismanaged brands and quality for years. Things are starting to look up now, but it’s way too late.

  • avatar
    Landcrusher

    I believe a sale to a chinese company would be a mistake for the big 3. As soon as one of them does this, the fear of buying from a weak automaker will go up big time. They are all weak automakers.

    Consider what will happen to the ownership experience of people who own Volvo’s when the deal happens. The growing pains that the Chinese start going through will lead to reduced values, supply chain interruptions, parts problems, etc.

    Unless the new owners are REALLY careful not to upset the cart, these things will happen. OTOH, they need to upset the cart to turn the companies around.

    I am sure I will hear from Bertel on this one, but part of the problem will be the perception of Chinese ownership. And, please, don’t give me India and Tata as a response. The Indians are not the chinese. There are not thousands of people around the US who own Indian manufactured engines for which they simply can’t get parts even if they wanted to bother to fix what will break again in a week.

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