Geely Has The Cash For Volvo… So Where's The Deal?

Edward Niedermeyer
by Edward Niedermeyer

Reuters (which has been all over the Volvo-Geely deal) reports that Zhejiang Geely Holding has money “in the bank account,” to purchase Ford’s Volvo brand, citing Swedish press reports. And yet, despite having reportedly given Ford guarantees about the financing of Volvo’s business plan, and scheduled a formal deal signing for last month, a deal has yet to emerge. Last week, Geely’s chairman Li Shufu told Reuters from the sidelines of the National People’s Congress in Beijing that “we haven’t reached a final agreement so far,” but “everything is moving as planned.” Geely has also been talking up its “only one foreign brand” strategy and “new energy” car plans, while Volvo reps tell AM Online that a deal will be done by March 31 and that Chinese market access will save the brand [via The WSJ [sub]]. In fact, the only party involved that’s not issuing a steady stream of PR about the upcoming deal is Ford. Could the Blue Oval be getting cold heels?

Automotive News Europe [sub]’s Luca Ciferri reckons that if Ford isn’t having second thoughts, it probably should be. Noting the collapse of almost every auto brand sale that’s been attempted over the last two years, Ciferri gives five reasons for Ford to interruptus the deal before it’s too late.

1) Ford is already rid of its most expensive and most time-consuming distractions – Aston Martin, Jaguar and Land Rover – so it has more time to concentrate on the Blue Oval.

2) Volvo is much more integrated within Ford in terms of platforms and engines than the three British brands.

3) Volvo’s near-premium market position is more coherent with what the ONE Ford plan aims to achieve globally.

4) Volvo is still Ford’s center of competence for safety, an area that has taken on a whole new level of importance as we watch Toyota’s reputation for reliability ravaged by its sticking accelerators and poor-performing brakes.

5) Volvo has its most complete and diversified product portfolio ever featuring a small car, the C30; large cars, the S80 and S60; a coupe-cabrio, the C70; and two stylish crossovers, the XC60 and XC90.

To which we would add that Ford’s circumstances today are considerably less dire than they were when it put Volvo on the market in December 2008. And the fact that Ford’s luxury divisions aren’t even close to where they need to be to compete globally. And that ONE Ford is turning out to be a little more nuanced than Ford initially let on. And won’t someone think of the technology?

On the other hand, $2b probably sounds too good to turn down, given all the nasty leverage on Ford’s books.

In the meantime, Tradingmarkets is out with the news that Ford’s current Volvo joint venture with China’s Chang’an is changing over their Mondeo production line to produce the brand new Volvo S60 in early 2011. That car, equipped with the latest in gadgetry, had been the center of much speculation about giving carefully guarded intellectual property to the wicked Chinese. It will have the prize-winning “Adaptive Cruise Control” (great for Chinese traffic jams,) its “Pedestrian Detection with Full Auto Brake” will be welcomed in pedestrian China.

Geely is taking the position that once they have bought Volvo fair and square, it will also include “the ownership of existing technologies in the fields of safety and environmental protection, as well as technologies of new car models.”

And let’s not forget that once the deal is closed, Geely owns 100 percent of Volvo, and hence one half of the joint venture with Chang’an. This will be interesting. And maybe it will be another step towards the consolidation sought so much by the Chinese government.

Edward Niedermeyer
Edward Niedermeyer

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  • John Horner John Horner on Mar 11, 2010

    I have consistently said that Ford would be idiots to sell Volvo to the Chinese. Chinese based auto manufacturers are likely to be the biggest global strategic challenge to Ford (and the rest of the industry) over the next few decades. Handing one of these competitors all the things they need to make the next big step in the global auto market in return for a few billion dollars is strategic idiocy. Volvo, unlike Saab, has a very competent core of engineers, scientists, manufacturing experts and production expertise. Volvo has a decent dealer network in most of the world's major markets. Volvo has a good brand name with generally high favorability ratings in the minds of potential customers. In short, Volvo has everything Geely needs to make a big leap forward. That $2B will be gone in a heart beat, and in its place Ford will have a formidable new competitor. How would Ford respond if Geely-Volvo were able to produce and sell a fully loaded Chinese manufactured S60 for less than a Fusion? Ditto the S80 vs. Taurus.

  • Rnc Rnc on Mar 11, 2010

    It seems that one of the hold ups is that Geely is looking for around $1.4 billion in funds from Europe (state aid) to be able to make them viable (product development, etc). Perhaps Ford is keeping more than we believe or that Geely is just playing the Fiat, Renault, PSA card.

  • Fred As a British Car Fan I liked them, but then I sat in one and changed my mind. I like the unique looks of the newer ones.
  • FreedMike Not much to look at, but these were sweet to drive.
  • EBFlex Ford finally making a good decision although they should shut down their EV operations and investment all together. Why lose that money too?
  • Mike Lol. This is the king of suvs. And its made by GM.Why is everyone trashing it?Top of its its class for a quarter century.
  • Frank Drove past there last week, plant has a huge poster of a bronco on the outside. I was thinking "Is that where they build the new broncos?" I know they use to make the Edge and that other mundane SUV there but I believe both have been canned.