By on March 18, 2010

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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11 Comments on “Ford And Geely Swear: No Volvo Troubles...”


  • avatar
    Dimwit

    The longer this drags on the less likely it looks. Where’s the incentive for Ford to follow through? They’re on the upswing rather nicely. Losing Volvo now seems to be a rather large case of bad timing and especially since they can save face by blaming the Chinese.

    • 0 avatar
      pcsario

      I would say not having to pay 1.4 billion dollars to keep money-losing Volvo alive, while also getting a 2 billion cash infusion, is a pretty good incentive.

  • avatar
    Telegraph Road

    Ford has a market capitalization now of $47 billion–far more than either VW or Nissan. I don’t understand why they want to sell Volvo for a mere $2 billion.

    • 0 avatar
      pcsario

      Market cap isn’t cash on hand.

      Anyway, similar things were said about keeping AM and LR. Sure, Jag was a money losing pit, but the other 2 were profitable, and they still sold them right before new, multi-billion investments were needed. At some point, you must simply ask yourself “Do I really need this?”

      In Ford’s case… no, they don’t need Volvo anymore.

    • 0 avatar
      drivebywire

      pcsario –

      > In Ford’s case… no, they don’t need Volvo anymore.

      No, Ford doesn’t need it any longer, since they’ve completed the Volvo==>Ford technology transfer and now try to pass it off as their own.

  • avatar
    Kristjan Ambroz

    Bertel,

    you will be even more tired of the complete lack of suspension of the TX4 – going over a less than perfectly surfaced road in one of them is a bit like having an infantry mortar being fired from the seat next to you ;) And the workmanship on quite some of them can awake longings for a Yugo – that other paragon of reliability and high quality of manufacture.

    Also not sure they will allow the relatively poluting TX4s to be registered in China now, or will they?

  • avatar
    bmoredlj

    That still sounds like such a low number. China has more cash right now than God and his brother…either Ford really wants serious Chinese competition in America ASAP, or are just being supernice to Geely, or they have terrible negotiators. Why not $4 billion? Why not $6 billion? Geely does want Volvo, right? Make ’em sweat a little, for cryin’ out loud!

  • avatar
    snabster

    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…

    • 0 avatar
      drivebywire

      snabster –

      > …what Geely is likely to do with Volvo…

      Volvo + Geely = sub-$20k S60 competing easily against Accord and Camry, for example

      If they can successfully (1) maintain pioneering real safety technology, (2) SIGNIFICANTLY reduce cost, and (3) convince customers that nothing has changed and the product is not now coated in lead paint, they might have a shot.

      Of course, by doing nothing, they might just sell more Volvos in China in 1 year than were sold worldwide in 10!

  • avatar
    Christopher

    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.

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