Volvo-Geely Fallout: It's The Money, Stupid

Bertel Schmitt
by Bertel Schmitt

The deal to sell Volvo to Geely may be falling apart after 10 months of heavy petting. Everybody from Bloomberg to the DetN has lapped up the leak that it’s all about intellectual property that may be misappropriated in the Middle Kingdom. The true crime: A massive insult to the intelligence of the dear reader is being perpetrated. If there are concerns about stealing trade secrets, why did they come up now and not earlier, while Ford and Geely were progressing from first to second base in a cloud of steam? Did they fall asleep in the drive-in? Whatta we gonna tell your mama? Whatta we gonna tell your pa? “We say it’s about trade secrets.” “Great idea. Works all the time.”

The Financial Times found a more likely cause for the sudden interuptus:



Plain old money. According to the FT, “Ford has better reasons than real or imagined abuses for holding off on the sale of its one remaining international brand. The US car market may be in a wretched state, but Ford isn’t.”

According to the FT, Ford wants a better deal. Ford has gained market share in 11 of the past 12 months. Volvo’s September sales were even up 12 percent. FT’s intrepid reporters couldn’t help but note that when Ford put Volvo up for sale last December, the supposedly smart money thought Ford would die: Short-sellers held one in eight Ford shares. Now, the short interest is only one in 33 shares. Ford is way out of the desperate firesale phase.

Ford’s latest quarterly filing shows a carrying value for Volvo of about $2.4b. Geely offers $2b, resulting in a book loss of $400m. Even the FT recommends that Mulally “shouldn’t settle for less” than the book value.

As opined by yours truly, foreign car companies have shared intellectual property with Chinese for more than 20 years. In joint venture companies. Ford happily shares Volvo IP with its Chinese joint venture partner Dongfeng.

IP is a handy excuse when a deal goes sour, or when the price should go up. When GM didn’t like the Magna deal, they cried about IP going to Russia. Now, no more IP problems, the problem is Brussels.

If IP is indeed what’s holding up the Volvo sale, then IP is an acronym for Increased Price.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

More by Bertel Schmitt

Comments
Join the conversation
2 of 4 comments
  • Geotpf Geotpf on Oct 22, 2009

    Volvo is in much better shape than Jaguar/Land Rover. Dumping those on Tata looks positively brillant at this point.

  • Guyincognito Guyincognito on Oct 22, 2009

    Ford is right to ask for more money for Volvo. Its not that I think Volvo is going to earn a profit any time soon, but their rep for safety would be a boon for any Chinese manufacturer. In fact, of all the automakers out there, I think Volvo would be the biggest prize for the Chinese.

  • Wolfwagen What I never see when they talk about electric trucks is how much do these things weigh and how much does that detract from the cargo-carrying capacity?
  • Wolfwagen I dont know how good the Triton is but if they could get it over here around the $25K - $30K They would probably sell like hotcakes. Make a stripped down version for fleet sales would also help
  • 3SpeedAutomatic You mentioned that Mitsubishi cars had lost their character. Many brands are losing that that element as well. GM is giving up on the ICE Camaro and Dodge on the ICE Challenger. There goes the Bad Boy image. Might as well get your teeth pulled and dentures put in place. Would like to see a few EVOs with cherry bomb exhaust and true 4 cylinder BIG blower turbos; 4 wheel drift capacity is mandatory!!🚗🚗🚗
  • Tassos Here in my overseas summer palace, I filled up my tank twice in May, at 68 and 52 euros (a full 90+ liter tank fillup has taken 130-135 Euros in the past, and I am 23 miles from downtown here, while only 1-2 miles in the US)Still, diesel here is MUCH cheaper than gas. Yesterday, I paid 1,488 a liter while gas was at least 1,899 (regular).Multiply by almost 4 for gallons AND by an additional 1.1 for $.
  • 3SpeedAutomatic IIRC, both China and the EU use a standardized charger connection. About time the US & Canada to follow.Would take some of the anxiety out of an EU purchase and accelerate adoption. 🚗🚗🚗
Next