This Is Not A Drill: Ford In Concrete Talks To Sell Volvo To China

Yesterday, we reported that Ford is in a big hurry to unload Volvo to interested parties (preferably) in China. The article quoted a story in London’s Times. The Times had received information that Ford is talking with SAIC to take Volvo off Ford’s hands. There are more interested buyers: Top executives of Ford’s Chinese joint venture partner Changan are in talks with Ford to buy Volvo. This according to China’s National Business Daily which has it from an insider at Changan.

At the Guangzhou auto show last month, Volvo’s top executives had long talks with Changan Auto president Xu Liuping. When Ford Motor announced its plan to sell Volvo, the presidents of Ford Asia Pacific, Ford China, and Volvo China met Changan’s president at Changan’s HQ in Chongqing for closed-door talks. NBD’s source added that it is logical for financially troubled Ford Motor to consider Changan as a possible Chinese partner of its Volvo brand, because they have the Changan Ford Mazda joint venture which is also producing the Volvo S40 and S80 models. There are more reasons to buy …

Allow us to reiterate why buying a foreign brand with international distribution would make absolute sense for a large Chinese automaker, and a large Chinese automaker only: The Chinese automotive industry is under considerable pressure to get on with their car exports. China is already the world’s second largest auto market. China will end 2008 as the world’s second largest auto producer. As an exporter of cars, China is a nobody. Last October, the officious China Daily rendered the official verdict: “China’s auto export numbers are discouraging,” There are a few exports to third world countries and Russia. These countries have problems with their economies and currencies. Europe, Japan, and the US have remained white spots on China’s export map. It’s not for a lack of trying. Europe, Japan, and the US are using every regulatory trick in their vast arsenal to keep home-grown Chinese cars out. Home-growns lack the engineering clout and money to break through these barriers.

Most of the cars currently built in China could be exported immediately. The cars built in China under joint venture agreements are for all intents and purposes identical to their American, German, Japanese, or French counterparts. Same design, same technology, same production methods, same parts, same quality standards. But under current contracts, these cars cannot be exported. If a Chinese company buys the joint venture partner, that limitation falls. Changan could sell made in China Volvos worldwide at the stroke of a pen. The dire straits of Ford and GM could give China the keys to quick-start their export machine. Furthermore, China is concerned about Detroit’s demise. They bought a lot of Chinese parts, either directly or through companies like Delphi or Federal Mogul who use China as a production base. Parts orders are way down. Believe it or not, a lot in Made-in-China cars are imported parts. By law, 40% of fleet must be local content. A lot of the completely new models are TKD, totally knocked down, made entirely from foreign kits. It is in China’s best interest that Western brands survive and that the supply lines, back and forth, do not get distrupted,

TTAC’s incessant interest in the tête-à-têtes between US and Chinese automakers is raising interest in China. In their reporting of the Changan-Ford dealings, Gasgoo felt compelled to add: “‘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,’ said a news blog (“ Confirmed: Ford Wants To Sell Volvo To China Real Fast“) by Bertel Schmitt at www.thetruthaboutcars.com on December 8.”