2010 Volvo S80Enlarge Photo
For $1.8 billion, all but $200 million of it in cash, the premiere Swedish brand that Ford paid $6.45 billion dollars for only eleven years ago will go to Chinese automaker Geely. Remember, Ford had previously taken a huge loss on the Jaguar-Land Rover sale to Tata for a third of what it had paid for them. Ouch. Talk about depreciation.
Will Volvos still be made in Sweden and Belgium? Apparently yes, for now. If they want to keep selling them, at least for now, that is a safe bet. And the Volvo name is all about safety.
This move greatly increases the prestige of Geely, one of China’s largest car manufacturers. Whether Volvo retains the reputation developed over 75 years remains to be seen. Volvo sales for last year totaled 334,808 for all ten models, and the top seller? Not the XC90 SUV. Nope, it was the XC60 crossover.
The double-edged sword is that without moving production to China, it will be hard to cut costs, but moving manufacturing out of Sweden will be tough. Over 20,000 jobs in Sweden will be affected--the trust is just not there yet for the Chinese car industry, and image is a fragile thing.
Meanwhile, the purchase of Jaguar-Land Rover by the Indian industrial giant Tata seems to be going very well indeed, judging by the new models. But Geely is not Tata, at least not yet.