Ford Reaches Deal to Sell Volvo to Chinese Automaker

Ford Reaches Deal to Sell Volvo to Chinese Automaker
By DAVID JOLLY
Copyright by The New York Times
Published: December 23, 2009
http://www.nytimes.com/2009/12/24/business/global/24auto.html?ref=global-home


PARIS — Ford Motor and Zhejiang Geely Holding Group said Wednesday that they had settled “all substantive commercial terms” on a sale of Volvo, clearing the way for the Chinese automaker to purchase the Swedish business early next year.

The U.S. automaker said that while final documentation, financing and government approvals remain to be completed, “Ford and Geely anticipate that a definitive sale agreement will be signed in the first quarter of 2010, with closing of the sale likely to occur in the second quarter 2010, subject to appropriate regulatory approvals.”

The companies did not disclose a price. John Gardiner, a Ford spokesman in London, declined to comment on the financial terms, saying “that kind of detail will come when we have a definitive agreement.”

Ford paid $6 billion in 1999 to buy Volvo; unconfirmed reports have said that Zhejiang Geely could pay $2 billion for the unit in the currently depressed market for automakers.

The joint announcement with Ford could ease the Chinese company’s efforts to obtain the necessary approvals in Beijing, which must give the green light for big overseas investments to go forward, Mr. Gardiner said.

Ford announced in October that it had selected Geely as the preferred bidder for Volvo over other contenders, and the announcement Wednesday appeared to signal that the American company was committed to finalizing a deal.

Geely, based in Hangzhou, said in a statement that it “expects to sign a definitive stock purchase agreement with Ford in the first quarter of 2010.”

Geely is the largest private automaker in China. A Volvo deal would mark one of the biggest moves yet by a Chinese car company in Europe or the United States. Beijing Automotive Industry Holding said last week it would buy carmaking technology for Saab cars from General Motors.

A sale “would ensure Volvo has the resources, including the capital investment, necessary to further strengthen the business and build its global franchise,” Ford said, while enabling the Detroit company to implement its own strategy. Ford is seeking to raise money as it refocuses on its North American and European operations.

Ford said it would continue to cooperate with Volvo in several areas, but it did not intend to retain a stake in the Swedish company.

Geely has sought to assuage anxiety about the deal in Sweden, saying it intends to maintain Volvo much as it is, including “an independent management” at its Gothenburg headquarters.

“Geely is committed to work with all stakeholders to complete the transaction in the best interest of all parties,” Li Shufu, Geely’s chairman, said in a statement. The company said it has held “constructive meetings” in recent weeks with Volvo management, labor representatives and government officials in Sweden and Belgium.

Assuming the deal goes through, “Volvo will retain its leadership in safety and environmental technologies, and will be uniquely positioned as a world-leading premium brand to exploit opportunities in the fast-growing China market,” Geely said.

General Motors, meanwhile, is still working to dispose of its own Swedish carmaker. G.M. said last week that it would shut down Saab, which is based in Trollhattan, after negotiations to sell the company to Spyker Cars, a tiny Dutch automaker, fell through.

Although G.M. has already begun the process of closing the company down, Spyker came back this week with a revised offer, and G.M. said it was studying the Spyker offer as well as other potential bids. While negotiations are continuing, analysts say Spyker’s bid appears to be a long shot.

Ford was the only Detroit automaker to avoid bankruptcy this year, as G.M. and Chrysler were bailed out by taxpayers, with the latter ending up under the wing of Fiat.

Ford is selling Volvo as part of its “One Ford” strategy, which aims at refocusing the company on what it has identified as its “core” global operations.

It sold Aston Martin to a British-Kuwaiti consortium in 2007, and sold Land Rover and Jaguar to the Indian automaker Tata Motors in 2008.

Ford last year also reduced its stake in Mazda Motor, the Japanese carmaker, to 13 percent from 33.4 percent.