Confirmed: Ford Wants To Sell Volvo To China Real Fast
The phone lines are running hot between Detroit and Shanghai. Ford is in talks with SAIC, China’s biggest car-maker, in what UK’s Times calls a “desperate attempt to sell its prestigious Volvo brand.” Ford has already tried before, and had been turned down by the Chinese. The Times quotes “a source close to the American motor giant” who says that earlier talks, which took place in summer, broke down over price. Ford had bought Volvo for $6.5b in 1999, and wanted to clear $5.9b. “Mei xi” (no dice) said the Chinese. The Detroit source that’s leaking to the Times (probably with a nod from higher up) says: “Now that Ford is in dire straits this would be a good opportunity for SAIC to snap up Volvo on the cheap. The price has dropped considerably since seeking a sale in the summer.”
According to Aaron Bragman, a car industry analyst with economic forecaster IHS Global Insight, “the sale of Volvo has become part of the conditions of Government assistance.” Ford is being advised by the investment bank JPMorgan Chase.
A spokesman for Ford confirmed that the company is in talks “with a Chinese car-maker,” but declined to name SAIC. SAIC likewise declined to comment. There are other suitors, just to keep SAIC from thinking they are the only game in town …
According to the rumor mill, Ford is also in talks with other potential bidders for Volvo, such as Tata, Dongfeng, Hyundai Motor, and equity firms such as Texas Pacific Group.
The private equity groups are widely seen as an intermediate step for chopping up the formerly Swedish car maker and then selling it (whole or in parts) to interested parties. The Chinese would be most interested in the brand, in the design, and in production know how. What all Chinese makers are interested in is an accepted foreign brand that eases their entry into the export market. Volvo with its safety cachet would be an ideal first step. The urgent deal between SAIC and Ford also explains the suave reaction of Changan, Ford’s joint venture partner in China. If the deal is consummated, Changan could sell their Ford operation to SAIC, or SAIC could swallow the whole Changan kit and caboodle.
SAIC is in joint ventures with Volkswagen and GM. The Chinese don’t see a problem in having competitors under one roof. Hyundai recently said that they are not interested in any foreign deals at all. Tata has their own problems. Dongfeng is in talks with GM. You can bet that Washington has given GM similar marching orders, and told them to get on with off-loading Saturn, Saab and possibly others if they want to see real government money.
“At a time when much of the world economy seems to be screeching to a halt, China appears likely to remain a rare oasis of healthy growth,” writes the Nikkei. The Tokyo business paper is not known for over-hyping China. “The Chinese government has aggressively responded to the global economic downturn by announcing a series of massive public investment plans. The stock market has also rebounded 20% from its low at the end of October.”
Prepare yourself for what TTAC has said for quite a while: There will be a major sell-out of brands held by the D2.8, and the likely buyers will be in China. The crazy part is that the US government apparently is ordering Detroit to do so. Selling off brands for cheap is the price of doing the begging in DC.
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.
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Stu, Had Ford engineered the Explorer properly and not encouraged the under inflation of the tires they would not have had that problem. It is mismanagement like this that has cost them a lot of money and credibility with consumers. They're still replacing the prone-to-spontaneous combusting cruise control units in their trucks - that's not safe to me. I do not equate Ford cars or trucks as safer than their domestic competition or anything foreign for that matter. And there's the issue with the fuel tanks in the Grand Marquis/Crown Vic that they refused to fix but would rather sell you an upgrade for safety that is well known now. Ford has mismanaged brands and quality for years. Things are starting to look up now, but it's way too late.
I believe a sale to a chinese company would be a mistake for the big 3. As soon as one of them does this, the fear of buying from a weak automaker will go up big time. They are all weak automakers. Consider what will happen to the ownership experience of people who own Volvo's when the deal happens. The growing pains that the Chinese start going through will lead to reduced values, supply chain interruptions, parts problems, etc. Unless the new owners are REALLY careful not to upset the cart, these things will happen. OTOH, they need to upset the cart to turn the companies around. I am sure I will hear from Bertel on this one, but part of the problem will be the perception of Chinese ownership. And, please, don't give me India and Tata as a response. The Indians are not the chinese. There are not thousands of people around the US who own Indian manufactured engines for which they simply can't get parts even if they wanted to bother to fix what will break again in a week.