Official: Ford Completes Sale Of Volvo To Geely

By Viknesh Vijayenthiran

Viknesh Vijayenthiran

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Vik is an Editor at High Gear Media and contributor for a number of sites within the High Gear Media network. He was a co-founder of Motor Authority... More

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2011 Volvo S60

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It’s official. Ford (NYSE: F) has announced today that it has completed the sale of Volvo and its related assets to the Zhejiang Geely Holding Group Company Limited (Geely).

The total purchase price for Volvo and the assets set forth in an agreement signed back in March 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. So far, Geely has issued the note and paid around $1.3 billion in cash to complete the sale.

Under the terms of the sale, Ford will continue to cooperate with Volvo in several areas in order to ensure a smooth transition, but will not retain any ownership in the Volvo business. Ford will also continue to supply Volvo with powertrains, stampings and other vehicle components for an undisclosed period of time, as well as provide engineering support and access to information technology.

As for Volvo’s intellectual property, co-developed with Ford, the sale agreement will allow Volvo to grant sublicenses to certain portions of this intellectual property to third parties, including Geely. The list most likely includes Volvo’s array of radar-based safety features, PowerShift dual clutch technology and forced-induction powertrain knowledge.

Also as part of the deal, current Volvo chief Stephen Odell will return to the Blue Oval, as will current Volvo CFO Stuart Rowley. Odell will now head Ford’s European division, while Rowley will act as CFO.

Where the Geely deal will leave Volvo's future lineup is uncertain. The Swedish automaker recently unveiled its 2010 XC60 crossover and a refreshed C70 Convertible, and has the all-new 2011 S60 sedan to come later this year.

Sources close to the Geely have previously revealed that under Chinese ownership Volvo would launch two or three bigger and more luxurious models within the next four years to try and boost global sales, eventually hoping to reach the one million vehicle mark within five years. Volvo currently sells around 400,000 vehicles per year worldwide. Quite ambitious certainly, but with access to the lucrative Chinese market Geely could build and sell up to 200,000 vehicles per year for sale in China alone.

According to a previous report, Geely also hopes to start production of Volvo cars in a new factory in the Guangdong Province of China. Sources at Volvo have told TheCarConnection.com that a future relationship with China would leave Sweden as the center of product planning, marketing and some initial engineering. Geely's China-based engineers would execute mid-level engineering and manufacturing development at a savings of up to 30 percent from high-cost Sweden. Volvo would also produce a model in a Geely factory in China to expand the brand's global presence, but the goal would be to leverage Volvo's reputation and brand value, teamed with lower-cost Chinese engineering and manufacturing.

In a sad twist of fate for Ford, Volvo finally started to turn a profit after years of losses. In fact, the Swedish automaker had a pretax profit of $53 million in the second quarter, compared with a $237 million loss for the same period a year ago.

[Ford, Geely]