By on August 2, 2010

Did we say last Thursday that the sale of Volvo from Ford to Geely „could close as soon as next week?” Did I believe it? Did I live in Chine for six years? Honestly, there was an element of surprise when, this Beijing afternoon, my inbox made that noise and there was an email from Ford, titled “Ford Motor Company Completes Sale of Volvo to Geely.” The deal is closed. Volvo is Chinese.

Today, Geely gave Ford $1.3b in cash and a promissory note to pay another $200m. Wait a minute, says the dedicated follower of the Volvo-Ford-Geely drama, wasn’t the purchase price $1.8b? Ford’s press release explains: “The total purchase price for Volvo and related assets set forth in the agreement signed in March 2010 was $1.8 billion, including a $200 million note and the balance in cash, with the cash portion subject to customary purchase price adjustments at closing.” Well, anyone who has ever sold a house can sympathize with those “customary purchase price adjustments at closing.”

Apparently, there was some haggling over $300m, and it might continue for a while. Says Ford: “The estimated purchase price adjustments used at closing are expected to be finalized and settled following final true-up of the purchase price adjustments later this year. The final true-up is expected to result in additional proceeds to Ford.” From the sound of it, they don’t expect a whole lot more “true-up”. The Chinese are masters of last minute bargaining, and they won.

There is no reason to haggle too hard, because Ford can make a nice business out of this on the back-end. They are now a supplier of critical parts to Volvo and Geely. Ford will supply Volvo with, “powertrains, stampings and other vehicle components. Ford also has committed to provide engineering support, information technology, access to tooling for common components, and other selected services for a transition period.” That can cost a pretty penny.

As far as personnel is concerned, Ford is only mentioning those who won’t go to China: “Stephen Odell, CEO of Volvo Car Corporation, is returning to Ford as group vice president and Chairman and CEO of Ford Europe. Stuart Rowley, CFO of Volvo Cars, is returning to Ford as chief financial officer, Ford Europe.”

No word about Hans Olov Olsson, former Volvo president, who will be vice chairman of Volvo, or of Stefan Jacoby, formerly head of Volkswagen of America, who will (if the rumors are true, and still current) be CEO of the Chinese-owned Volvo. That’s Volvo’s business, and has no place in the announcement of Ford.

But there’s word from the head of Sweden’s IF Metall union, Stefan Lofven. He likes the deal now: “Volvo will have a management and governance of large industrial and international expertise. With production, research and development and headquarters remaining in Sweden, while China is the biggest growth market for the automotive industry, we hope for positive employment effects,” said Lofven to the Wall Street Journal. He’ll travel to China in a few months to meet the new bosses.

They’ll probably show him the plans for a new Volvo plant in China. “When you look at the car industry in China, if you want to be even a 2 percent player there — and 2 percent is not a bad aspiration — you have to have local manufacturing,” said outgoing Stephen Odell to Bloomberg last week. “It’s clear Volvo needs more capacity to grow.”

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14 Comments on “Done Deal: Volvo Is Chinese...”

  • avatar

    Well, if I ever thought of buying a Volvo (and I had at one time)…that plan goes out the window now…

    • 0 avatar

      I’ve got to admit, the transition is one reason we didn’t buy another Volvo…after owning 5 of them over the last decade and a half. I will take a wait and see attitude before buying another Volvo.

      I also thought Volvo pricing got totally out of tune with it’s market. Take for example the Volvo C30 which was basically a really expensive Mazda3.

  • avatar

    Ashes to ashes and dust to dust. May Volvo RIP at least here.

    In China, Volvo may become the next Buick. In the best case, in the US it may end up the new aspiration brand for Hyundai owners.

  • avatar
    John Horner

    I doubt many US buyers will care where the nominal ownership of Volvo lies. Has Jaguar suffered with buyers because corporate controls rests in India? The big change would be if Volvos sold in the US start coming with Made in China stickers attached. If that happens, Volvo will have to dramatically lower its US selling prices to match the expectations of buyers.

    But as I have said before, watch out if well equipped, Chinese built S80s start selling for $29,999.

  • avatar

    Apparently, there was some haggling over $300…

    Wow – they really get down to the nitty gritty in those corporate deals, don’t they?

    The irony here, of course, is that after some smug Volvo ads saying, “Saab is gone, it’s OK to buy a Volvo now”, Saab is under fully independent European ownership and Volvo has been sucked up by a conglomerate that will likely make GM look like a good home, and has just lost all credibility with its target audience (as per Disaster’s comment).

  • avatar
    Dr Strangelove

    My initial reaction to the first rumors was negative, too. However, I now think that this will work – as the first major Western brand the Chinese managed to buy, they will make sure of it.

    Volvo needs scale, which the Chinese market provides, and the Chinese need credible engineering and quality, which Volvo has.

    I like my current Volvo and will buy another one if the price is right.

  • avatar

    Well; You(americans) buy everything else from China.
    Why not cars?

  • avatar

    Is Geely owned by the Chinese government?

    In any case, this news will only play to those of us paying attention. To most North Americans, they’ll likely never know this info unless it’s stamped somewhere prominently, ‘Made in China’.

    I think of how few people I know ever knew that Ford owned Jag unless I told them.

  • avatar

    Japanese cars were once a joke in America, as were Korean cars. Yugoslavian cars remain a joke here, but there’s no reason China can’t earn our trust. They just have to do it.

    Brilliance BS6s made out of cottage cheese, BYD vaporware electric cars and blatant IP theft won’t cut it. Continuing to churn out quality Volvos might…if they can iron out the problems with the collision avoidance system, that is.

  • avatar

    The two Volvo Cross Country/XC70s (2001 & 2005) we owned were much-less-than-reliable, what with their leaking oil lines, gas tank problems, little burned out bulbs, failing window motors, de-laminating door trim, and so on. As I have already sworn never to buy one again, the change in ownership (my instinct is for the worse) is of little consequence to me.

  • avatar

    Cool! Maybe Wal-Mart will start selling Volvos now.

  • avatar

    I think that FoMoCo will eventually regret selling Volvo. Of the four marques in the PAG group (Aston, Jaguar, Land Rover and Volvo) it probably had the most value – manufacturing processes, safety engineering etcetera – that Ford was able to purloin for it’s own systems.

    If Ford maintains the same relationship with Volvo that it still has with Mazda it might not have been a bad move, but I suspect the Chinese will squeeze Ford out of the picture very quickly and eventually claim Volvo as a homegrown luxury brand with international cachet.

  • avatar
    Sam P

    In ten years the quality of Chinese-built vehicles could easily be where the quality of Korean-built vehicles is today.

    15 years ago, Hyundai was largely regarded as a joke, and Korean electronics didn’t have many virtues besides being cheap.

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