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Ford near deal to sell Volvo to Chinese firm

Ford says that it has worked out 'all substantive commercial terms' with Zhejiang Geely Holding Group and that the sale could be finalized by the end of the second quarter.

December 24, 2009|By Martin Zimmerman and Ken Bensinger
  • A Volvo is gift-ready at the Rusnak dealership in Pasadena. Ford, which paid $6 billion for Volvo in 1999, is selling the Swedish carmaker to a Chinese company for a reported $2 billion.
A Volvo is gift-ready at the Rusnak dealership in Pasadena. Ford, which… (David McNew / Getty Images )

Ford Motor Co. may pull off a feat its crosstown rival hasn't been able to manage: the successful sale of a Swedish car company.

Ford is close to selling its Volvo brand to Chinese automaker Zhejiang Geely Holding Group Co., the Dearborn, Mich.-based car maker said Wednesday. The companies have worked out "all substantive commercial terms" related to Volvo, Ford said, and the deal could be completed by the end of the second quarter of 2010. The automakers still need to work out financing and government approvals, however.

If the deal is sealed, it would stand in sharp contrast to failed efforts by General Motors Co. to sell its Saturn and Saab brands in recent months. Last week, Detroit-based GM said it would wind down Saab, as it previously said it would with Saturn, after it was unable to come to terms with bidders for the 60-year-old Swedish company.

Ford's quest to secure what appears to be a serious buyer was helped by Volvo's well-defined reputation for safety engineering, said Jeremy Anwyl, chief executive of online automotive site Edmunds.com.

"Volvo is clearly the strongest of the three brands," Anwyl said. "What does Saab stand for? What does Saturn stand for? Volvo has a very clear brand resonance around the whole concept of safety."

Ford wouldn't disclose the purchase price for Volvo, which is based in Gothenburg, Sweden. Unconfirmed reports suggest it could be $2 billion. Ford paid $6 billion in 1999 for Volvo, but it has been a steady money loser.

Selling Volvo would complete Ford's plan to shed noncore brands as it slims down operations. In 2006, Ford sold Aston Martin to a British consortium with Kuwaiti backing, and last year it sold Land Rover and Jaguar to Indian carmaker Tata Motors for $2.3 billion.

Much like GM, Ford has been trying to navigate the worst auto market in decades in part by focusing its vehicle development and marketing resources on a handful of nameplates, analysts said.

Ford has been considering offers for Volvo for some time, and in October the company said that Geely, a Hangzhou automaker that is among China's largest, was its "preferred bidder." A group of former Ford employees also had considered making a bid.

After the sale is completed, Ford said it would continue to work with Volvo on some issues, but that it would not retain a stake in the automaker. A definitive sale agreement, Ford said, would be released in the first quarter of next year.

Volvo's automotive operations employ about 20,000 people worldwide, with about 15,000 of those in Sweden. It sold 310,000 vehicles globally last year. Through November of this year it had sold about 55,797 vehicles in the United States, down 18% from a year ago.

Geely, one of several Chinese automakers looking to gain a foothold in the U.S. market, could use the Volvo purchase to further its global growth strategy, said Anwyl of Edmunds.com.

"Geely is getting an organization that has many, many years of [experience] building and selling automobiles on a global stage," he said.

The Chinese firm didn't address reports that it plans to build a Volvo factory in China.

"Geely Automobile is set to work together with all stakeholders to complete the transaction in everyone's best interest," Geely Chairman Li Shufu said in a statement.

On Wall Street, Ford's stock climbed 18 cents, or almost 2%, to $10.08 Wednesday. It was the first time Ford's stock, which sold for more than $60 a share in the late '90s, closed above $10 since September 2005.

Earlier this month, Chinese automaker Beijing Automotive Industry Holding Co. agreed to buy some of Saab's drivetrain technology from GM, but not the entire brand.

GM had tried to sell the brand to a Swedish supercar maker, Koenigsegg, and later to a high-end Dutch automaker, Spyker, but both deals collapsed. Spyker made a new offer over the weekend, but GM said that if a deal is not completed by the end of the year it will close Saab.

Currently, GM is negotiating the sale of its Hummer brand to a Chinese company, Sichuan Tengzhong Heavy Industrial Machinery Co., although a closure date has not been announced.

martin.zimmerman @latimes.com

ken.bensinger@latimes.com

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