Newsmax TV & Webwww.newsmax.comFREE - In Google Play
Newsmax TV & Webwww.newsmax.comFREE - On the App Store
Tags: Ford Motor | near | agreement | sell | Volvo | Swedish | cars unit

Geely's Volvo Deal to Tighten China Grip on Autos

Thursday, 24 December 2009 01:16 PM EST

Ford Motor Co. said on Wednesday it is nearing an agreement to sell its Volvo Swedish cars unit to China's Geely in a deal that underscores China's arrival as a major force in the global auto industry.

The deal, which Ford said it expects to sign in the first quarter and close in the second quarter of 2010, would be the largest acquisition of an auto brand by a Chinese company.

It comes at the end of a year that has seen China overtake the United States as the world's biggest auto market in a reversal of fortune that would have been unthinkable only a few years ago.

Traditional Ford rival General Motors Co., meanwhile, is moving to abandon its own Swedish brand, Saab, after selling some assets to another Chinese automaker, Beijing Automotive Industry Holding Corp., or BAIC, for $200 million.

Geely Automobile Holdings Ltd. is China's largest private automaker. Its charismatic founder, Li Shu Fu, sometimes likened to Henry Ford, has shown global ambitions for Geely, which means "lucky" in Chinese.

As U.S. automakers have faced deepening distress over the past two years, Chinese automakers have had preliminary talks about buying a range of assets, but those deals have been small in scope and difficult to close until now.

Dearborn, Michigan-based Ford Motor said it had agreed on all substantial terms in a deal to sell Volvo to China's Zhejiang Geely Holding Group, parent of Geely Auto.

The unusual update on negotiations from Ford and Geely was seen as a signal to China's government, which must approve the sale. Such approval is needed for Geely to be able to borrow $1 billion or more from Chinese banks.

"While some work still remains to be completed before signing ... Ford and Geely anticipate that a definitive sale agreement will be signed in the first quarter of 2010," Ford said in a statement on Wednesday.

The value of the deal has been estimated at $1.8 billion — far short of the $6.45 billion Ford paid for Volvo in 1999.

But for Ford, closing the sale would give it cash at a time when it is looking to repay debt faster, as the No. 2 U.S. automaker strives to return to profitability by 2011.

Should Ford close on Volvo's sale as expected, it will have succeeded in divesting all three of its luxury brands. It sold Jaguar and Land Rover to India's Tata Motors Ltd. in 2008 and sold British-based Aston Martin in 2007.

Shares in Ford topped $10 on Wednesday for the first time since 2005. The stock has more than tripled since the start of the year as Ford has gained market share and steered clear of the government-directed bankruptcies that remade Chrysler Group LLC and GM.

In contrast with Ford, GM has struggled to unload brands in the downturn. A deal to sell Saturn collapsed, GM pulled plans to sell Opel, its sale of Hummer has been delayed, and Saab would shut without an eleventh-hour deal.

BAIC, China's fifth-largest automaker, bought rights to older Saab models from GM. It said on Wednesday that it would launch an aggressive campaign to develop its brand both at home and overseas based on the deal.

The rest of Saab faces closure unless a last-gasp offer by Dutch-listed luxury car maker Spyker Cars NV is accepted by GM, which said last week it would begin winding down the brand it has controlled for 20 years.

BAIC, which does not have its own car brand, said the acquisition of Saab tooling has cut four to five years from its vehicle development plans.

BAIC plans to immediately start integrating Saab technology into its vehicles, with an aim to sell 100,000 vehicles based on its own development in 2011.

Tan Kunyuan, an analyst at Changjiang Securities, said that target for BAIC would be aggressive. "It will take at least a year for the market to recognize the brand, and BAIC probably would need to modify the appearance of Saab cars to fit with Chinese market demand."

The Beijing-based automaker is in a production partnership with Daimler AG  and Hyundai Motor Co., with most of their joint output for sale in the domestic market.

BAIC's Saab acquisition includes the intellectual property for Saab's 9-5 and 9-3 sedans and some equipment to make them.

The rise of China's auto market and the collapse in the U.S. market have both been more dramatic than analysts and industry planners had expected.

Auto sales in China, including commercial sales, have more than doubled since 2005, rising near 13 million units this year from 5.76 million just four years ago.

By contrast, the U.S. market has plunged from 16.95 million vehicles in 2005 to near 10.4 million this year.

© 2023 Thomson/Reuters. All rights reserved.

Ford Motor Co. said on Wednesday it is nearing an agreement to sell its Volvo Swedish cars unit to China's Geely in a deal that underscores China's arrival as a major force in the global auto industry. The deal, which Ford said it expects to sign in the first quarter and...
Ford Motor,near,agreement,sell,Volvo,Swedish,cars unit,China,Geely
Thursday, 24 December 2009 01:16 PM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
Get Newsmax Text Alerts

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved
© Newsmax Media, Inc.
All Rights Reserved