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Official: Ford Completes Sale Of Volvo To Geely

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2011 Volvo S60

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]

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Comments (16)
  1. Volvo is not the brand to go bigger. If China is going to support 50% of volvo volume where are the other bigger cars going to be sold. If we project fuel price forward by 4 years and say £4 per Ltr say 50SKr who in the world will be able to afford to run one? There is overcapacity and China is doomed if it thinks it can rule the world. In 4 years time Car sales in will be unsustainable. Why?? Think??
     
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  2. Geely better do a rethink...
    If they buy Volvo, many people who would have been Volvo buyers will refuse to buy a Chinese car.
     
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  3. If you think the Chinese are stupid enough to destroy the brand you are underestimating their desire on becoming major players in the automotive industry. The Chinese have a vested interest in keeping Volvo a world class brand. They want to improve their competitive edge - not destroy it. The same ignorant comments were made about the Japanese and Korean manufactures when they first introduced cars in North America. Remember when people were smashing Japanese cars in misguided “Buy American” rallies? Who won that battle? Hyundai were absolute death traps when they first arrived in the West now they are now a major player in the car industry and make decent cars. Jaguar and Land Rover are now owed by Tata an Indian company, and more brands will likely fall into Chinese or Asian hands. You can criticize the Chinese all you want but they are not stupid and they have the money and time to seriously take on the global automotive industry. The purchase of Volvo is a smart business move and one that may turn out to be as fruitful as the IBM-Lenovo merger.
     
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  4. Gas prices seems to be staying well below the $4/gallon levels they reached last summer. Our severe economic downturn--recession? depression?--has destroyed consumer confidence, cutting US auto sales by an unthinkable 40 percent and devastating all automakers.
     
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  5. My gut feeling says Chinese at least will not do things as stupid as GM did on Saab in the past decade.
     
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  6. nobody wants a chinese built volvo...no one wants a chinese built anything, besides great tasting sesame chicken and a interesting travel destination...
     
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  7. the biggest group to sign off would be the Swedish goverment, would they let a company close its factories that employ 45% of it work force????cars made in china will stay in china
     
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  8. "My gut feeling says Chinese at least will not do things as stupid as GM did on Saab in the past decade."
    At least GM didn't put Melamine in Baby Formula, AntiFreeze in Toothpaste and paint toys with Lead Paint...
     
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  9. Personally I am cautiously optimistic about Volvo's future. I will not under-estimate Chinese because they have the ambition to be the world's best. I have no doubt that Chinese will do all they can to keep Volvo a world brand. I envision Volvo of tomorrow will be more luxurious and flashy than ever before Chinese takes it over. My concern is the long-term quality... I do hope Chinese will continue Volvo's tradition in Safety innovations and not cut corner just to save a few bucks. Will I buy a Volvo under Chinese's management? Probably not in the first few years. I will have to wait and see how Chinese manages Volvo.
     
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  10. Less then Ford wanted for the company but least they got rid of Volvo, whose sales are down.
     
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  11. RIP Volvo
     
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  12. If the decision to buy or not to buy a car is based solely on prejudicial rhetoric backed only by gross generalizations, circular logic, and stereotyping then it has no crdibility. It is a losing decision
     
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  13. Volvo owners you are using Chinese car
     
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  14. People who think that Chinese or Indian for that matter would spend a lot of money on a premiere brand only to destroy it by compromising its quality must be living in a cave. If they had the brain to make that much money to buy Jaguar, Land Rover or Volvo, they are definitely not that stupid as to lower standards to spoil the element that customers look for before parting with top dollar to buy these brands.
     
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  15. Not really VolvoFan, look at the statistics, China has more fatal car accidents then any other country, one car they wanted to sell in Europe got a ONE star crash test rating, the car imploded in on itself
     
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  16. This is quite analagous to IBM's divestment of its laptop business to Lenovo. I have no doubt that China can produce cars to the required standard (remember how Japanese quality "suddenly" became the best in the world - we're at the same point with China and Taiwan; even Japanese companies are outsourcing to China!).

    The issue will be three or four years from now, when Geely will start to produce Volvos using its own design. Only time will tell if they can maintain Volvo's image of safety and quality within their designs.

    That has been an issue for Lenovo, whose latest Thinkpads aren't nearly as bulletproof or reliable as previous generations were.
     
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