Ford And Geely Swear: No Volvo Troubles
China’s Geely and Ford say they are on track to sign a deal on Volvo, says Reuters after checking back with the players. Spokesmen for Ford and Geely said their companies still plan to sign on the dotted line by the end of the month. Then, the deal would close sometime in summer.
Doubts were raised by China Daily, China’s government-owned and English speaking newspaper. They speculated that “financing and technology issues could delay Zhejiang Geely Holding Group, the parent of Geely Automobile, in its plan to acquire the Volvo brand from US automaker Ford Motor Co,” after talking to “sources familiar with the matter.” The same sources said that “the chances of a short-term deal now looks bleak, unless the two sides make major concessions.” At first glance, this smells like some last minute arm-wrestling, not too foreign to anybody living in China. However, China Daily sees two problems, far beyond the usual haggling:
“Geely has so far managed to secure $2.1 billion worth of financing.” Some of this money is from local governments, and they can be slow. “The funds from local governments may take some time to materialize and that could delay the deal,” says China Daily.
Also, Geely would have to spend at least $1.4 billion to finance car development, marketing, production and distribution next year.
Should the Volvo deal fall through, then Geely can console itself with the fact that their hold on another iconic European brand tightens: Manganeze Bronze, the maker London taxis and heavy losses, is set to give Geely a controlling 51 percent share. Production of bodies and chassis for the TX4 taxi will be moved from the Coventry plant in central England to Shanghai, says China Daily. With the near monopoly in London threatened by other makers, it’s time that Geely brings more of the TX4s to China. I’m tired of the cramped legroom in the back of a MK2 Jetta or a Hyundai Elantra.
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I'd be curious to know Bertel's views of what Geely is likely to do with Volvo, assuming the sale goes through. I've always though there were never be a market for Chinese cars in the US -- too many used cars at lower price points -- but after driving through western PA was amazed at the number of Suzukis on the road. I thought I was in India for a second...
All indications are that Ford is proceeding internally as if the sale of Volvo is a forgone conclusion. They are continuing to separate their IT and business resources. The fact is, Volvo is being sold. Whether it is to Geely or not -- that is the question.