Chinese automaker Zhejiang Geely to buy out Volvo

Chinese automaker Zhejiang Geely to buy out Volvo

The US automaker said 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.

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 finalising 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.
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 per cent from 33.4 per cent.