Volvo's pending sale to Chinese automaker Zhejiang Geely Holding Group could lead to big changes (or not) for the Swedish automaker and its thousands of employees, but what about its hundreds of Volvo dealerships here in the States? Could Volvo dealers be granted Geely franchises? Will the Chinese automaker utilize its new sales channels to slowly introduce low-cost Chinese vehicles to the U.S. market? Automotive News asked dealers from around the country if they would be interested in selling Geely models, and the responses were mixed at best.According to AN, many dealers were "receptive" to selling low-cost Geely models; a seemingly expected answer for any good business type. Mark O'Steen of O'Steen Volvo in Jacksonville, Florida reportedly called the possibility of selling Geely models "appealing," adding "it is just another niche that we don't cover, and hopefully they do have some potential in the United States." Mike DiChristofano, vice president of Volvo of Tucson in Arizona had perhaps the best answer of all, pointing to the inability of General Motors to selll off Saab (at least to this point), adding "until this deal goes down, I'm not even thinking about selling a Geely car."Even if Geely does plan to begin selling Chinese vehicles to the U.S. market by using Volvo dealers, the plan will likely take a lot of time to materialize. Geely reportedly has a lot of work to do to improve safety and quality before being ready for the U.S. market. Global Insight analyst Lin Huaibin told AN that Geely is at least five years away from having products ready for American showrooms.
Prior to Ford Motor Company's statement that it had agreed in principal to sell Volvo to China's Geely, some former Volvo executives wrote a letter to Bill Ford voicing their collective concern with the deal. The former execs felt Geely didn't have the cash or products to keep Volvo competitive and there was also a sense that Geely would somehow change how Volvo was run.
Reuters reports that Volvo has nothing to worry about, at least according to the head cheese at Geely. Geely founder and chairman Li Shufu reportedly told the official Xinhua news agency "if the deal succeeds, nothing will change for Volvo, except the boss turns to Li Shufu," adding that Volvo and Geely will be "independently-managed brands." Besides showing that CEOs can be as good at referring to themselves in the third person as any pro athlete, Shufu also insisted that Volvo's production, research and development facilities, union agreements and dealer networks will all be left intact.
Reuters estimates that acquiring Volvo will cost Geely about $1.8 billion dollars, though Shufu adds that the complications over intellectual property were much more costly than the final price tag. The Geely chief added that Volvo could help the Chinese automaker move more upscale, including helping the company build what he calls an "energy-powered vehicle." We're guessing he's referring to electric vehicles.
Ford Motor Company has just announced that all major terms relating to the sale of Volvo have been settled between Ford and Zhejiang Geely Holding Group Company Limited. That doesn't mean that all the Ts have been crossed on the deal, but it does indicate that Geely has met all of Ford's terms for the sale to be complete. Ford has issued a press release stating that a definitive sale agreement will be signed in the first quarter of 2010, while the final sale won't take place until Q2.
Earlier in the month, former Volvo executives sent a letter to Ford Chairman Bill Ford, Jr. voicing their concern that Geely doesn't have the necessary resources to support Volvo. Not so, according to Ford's press release. The Blue Oval states "the prospective sale would ensure Volvo has the resources, including the capital investment, necessary to further strengthen the business and build its global franchise." And even though Ford will likely soon be handing over the keys to Volvo to a Chinese automaker, the company still intends to work closely with the Swedish automaker post-sale. That makes sense considering the fact that all Volvo products share platforms and components with Ford-branded cars and crossovers.
The sale will also go far in achieving Ford's goal of divesting itself of its non-core assets so the Dearborn, MI-based automaker can concentrate on matters closer to the Blue Oval's heart.
Back in October, Ford anointed China's Geely Holding Group as its preferred bidder for Swedish Automaker Volvo. The move made perfect sense for Ford, simply because Geely was offering money and the recent happenings in the auto industry proved that, beyond the shadow of a doubt, you can never have too much money. But it should come as a surprise of nobody that there is a significant delegation of past and present members of Volvo management that aren't all that thrilled with being engulfed by an up and coming Chinese company.
Sweden news site The Local is reporting that eight former Volvo directors have collaborated on a letter to Ford Chairman Bill Ford Jr. asking the Blue Oval to reconsider a sale to Geely. The letter reportedly states that Geely doesn't have the technical competence to keep the Swedish automaker going. The letter also allegedly stated that Volvo is concerned about technical details being leaked to Geely -- a situation Ford likely wouldn't be too happy with.
While past Volvo directors appear to be very concerned about the prospect of Geely taking over the company, current Volvo management is speaking out in favor of the deal. That's probably a good idea considering the real possibility that the Chinese automaker could soon be the masters of the current management's future with the safety-oriented automaker. Politicians are getting in on the debate as well, as democrats are reportedly likening ceding control of Volvo to Geely to selling the company to China and to Communism.
Just about every time an automaker decides to sell one of its brands, Chinese automaker Geely comes up as one of the potential suitors. Geely executive Lawrence Ang has reportedly told Automotive News that the reason Geely has been present at a lot of negotiating tables is because it wants to grow in part through acquisitions. And while the Chinese automaker has yet to finalize any big-ticket buys, it appears to be the front-runner for Ford's Volvo unit.
Earlier in the year, Geely looked into purchasing the Saab brand, but talks reportedly broke down after Koenigsegg presented what appeared to be the winning bid. But now that Koenigsegg has dropped out of the Saab sweepstakes, the door is open again for Geely. Is the Chinese automaker interested? Ang reportedly gave reporters at a shareholder event the ambiguous "who knows?" as an answer, but he also acknowledged that the company is investigating buying opportunities which have presented themselves during the automotive industry downturns in Europe and the States. Geely is also reportedly interested in purchasing parts and engines, which could be possible if General Motors decides to disband Saab if an adequate bid doesn't present itself by year-end.
While Geely appears to be close to purchasing Volvo and is perhaps in a good position to pick up Saab for a song, the automaker is also looking to increase its presence in its home market. Automotive News is reporting that Geely will increase spending by up to 43% in hopes of increasing sales from 300,000 in 2009 to over 400,000 next year.
Just about a month ago, news hit the interwebs that Chinese automaker Geely officially became Ford's preferred bidder for Volvo once concerns over intellectual property were sorted out. Today, though, we're hearing that Crown, a consortium led by former Ford director Michael Dingman, former Ford and Chrysler LLC executive Shamel Rushwin and ex-Volvo CEO Roger Holtback, is gaining momentum in its bid for the Swedish automaker after submitting a revised proposal.
If reports from The Wall Street Journal and Reuters are accurate, Crown's new bid is "on par" with Geely's $1.8 billion offer and is backed by both Swedish and Chinese investors and banks. Not surprisingly, Ford has yet to comment on the speculation, though it has said that talks with Geely are already at an advanced stage. Stay tuned.
Should Geely succeed in its bid to purchase Volvo, the Chinese automaker does not plan to spend any time playing in its new Swedish sandbox. Ford moved about 380,000 Volvos around the world last year; Geely wants to sell 2.5 times that amount within five years. How so? By injecting "two or three bigger, more luxurious cars" into the lineup and working its home market of China, which Geely feels could be unlocked for 200,000 vehicles alone. Those units could be supplied by a Chinese factory capable of making 300,000 cars per year and would presumably be larger than the upcoming redesigned S60 (above).
Ford has designated Geely its preferred bidder for Volvo. However, in an echo of the tensions between General Motors and Magna's Russian bidding partner Sberbank, Geely will need to address Ford's intellectual property concerns among other issues to complete a sale. Volvo's technologies and reputation for safety are probably worth as much as the company's physical assets, so it's not surprising that Ford wants to negotiate the technology transfer. Assuming they can come to terms, closing the deal is expected to cost Geely $2 billion.
It's been rumored for months Chinese automaker Geely had the best shot at picking up the Volvo brand from Ford, and today, Dearborn has finally confirmed it. Geely was named as the preferred bidder this morning and the Blue Oval is proceeding with negotiations. However, this is not going to be an easy deal to close. Ford doesn't want to keep any stake in the Swedish company, although it does hope to continue some product cooperation.
In spite of the lack of shareholding, Ford doesn't want Volvo to wither on the vine and wants whoever buys it to have the resources to make it a going concern – unlike what happened when BMW dumped Rover. Perhaps the toughest nut to crack will be intellectual property concerns. Any time a sale like this happens, the seller is be concerned about leaving too much information lying around, and that concern is understandably amplified when dealing with an up-and-coming Chinese company.
Ford has been trying to offload the Volvo brand since December of 2008, but after years of rumors and speculation those 10 months feel more like a decade. China's Geely has been speculated as the number-one bidder for the Blue Oval's Swedish luxury brand, but a report by Bloomberg asserts that the long-awaited accord could be shelved due to concerns over Ford's intellectual property.
Because Volvo is so tightly integrated into Ford's product development, any buyer of the safety-minded car maker would have inside knowledge of the Blue Oval's future product plans and access to its latest and greatest technology. The buyer would also have direct access to Ford's vehicle architectures, since so many are shared between itself and Volvo. If Geely does in fact purchase Volvo, those platforms, which pass both European and U.S. crash test standards with flying colors, it could give China's largest automaker a better chance of entering the coveted U.S. market. And helping Chinese automakers enter the States probably isn't at the top of the list of things Ford wants to do right now.
U.S. and European automakers have had their hands full in attempting to curb China's lax intellectual property rules. Some vehicles built by Chinese automakers and sold in the land of the Great Wall are nothing more than carbon copies of vehicles from American., Japanese and European automakers... save for a new logo. Ford is also dealing with the case of Xiang Dong Yu, an ex Ford engineer who stole 4,000 sensitive and confidential documents from the Dearborn, MI-based automaker. The sticky-fingered engineer reportedly pilfered the documents in an effort to get a job at Shanghai Automotive but he was instead hired by Bejing Automotive.
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With General Motors and Ford both trying to divest themselves of underperforming operations that aren't core to their U.S.-based businesses, the automakers are finding things tougher than simply locating someone willing to write a check. As automakers have rationalized their operations, they have done a lot of platform and technology sharing among the brands under their umbrellas, making extracting individual marques a difficult business. Because automakers around the world are struggling, finding buyers is even more problematic, and the world's most willing bidders seem to be in places like China and Russia – locales where respect for intellectual property rights is dubious.
The Beijing Automotive Industry Holding Co. bid for Opel was killed because of such concerns. Magna's bid has faced similar worries because much of the financing is coming from Russia.
The lead bidder for Ford's Volvo unit is currently Chinese automaker Geely, but Ford is apparently having second thoughts because it doesn't want to share too much of its technology with the potential buyer. A second potential purchaser has entered the picture, a U.S.-based group with backing from several private equity funds. The Crown consortium has reportedly offered less up-front money than Geely but made similar investment commitments to the Swedish brand. If things don't work out with Geely, Ford could turn to the American group, but no one is talking publicly right now.
