Former Ford Execs Vie For Volvo -- And They Just Might Win

October 6, 2009

The government of China may be angling hard to unseat the U.S. as the world's dominant economic power (case in point: itsstrong support of a plan to end oil trading in U.S. dollar formats), but China's homegrown companies don't have quite as much weight to throw around. As an example, look no further than Chinese automaker Geely and its drawn-out attempt to purchase Volvo from Ford. Today, Geely faces a bidding war with a consortium of former U.S. auto executives, and although the Americans' offer isn't quite as generous as Geely's is, they do have some distinct advantages at the bargaining table.

The U.S. consortium calls itself Crown, and it's led by former Ford and Chrysler executive Shamel Rushwin and former Ford director and "veteran turnround specialist" Michael Dingman. Rushwin and Dingman have secured funding from equity groups in the U.S., but to grow that pot of dough, they're also courting support from unspecified Swedish investors, offering them up to a one-third stake in the consortium. As we previously reported, a group of Swedish investors called Konsortium Jakob AB began making a play for Volvo over the summer, but so far, they've had little luck raising the necessary funds. This could present a perfect opportunity for the two consortia to collaborate.

Geely has reportedly offered $2 billion for Volvo, and although Crown's offer hasn't been made public, sources close to the deal say that its offer is "significantly less" than Geely's. (NB: both offers clock in far below the $6.45 billion Ford paid for Volvo ten years ago, so Blue Oval's going to take a loss either way.) However, despite its slightly lower offer, Crown does have some advantages on its side:

1. Crown doesn't have to deal with the same bureaucratic rigmarole that Geely does. If Sichuan Tengzhong's attempts to purchase HUMMER are any guide, Geely will have to jump through many more hoops to clinch the deal and will be subject to many more restrictions than its U.S. rivals.

2. Crown has matched Geely's offer to invest over $3 billion in Volvo after the completion of a deal.

3. Ford and Volvo have both expressed hope that the brand and could remain largely based in Sweden. If Crown secures ample funding -- especially if that funding comes from Swedish investors -- that could easily tip the scales.

4. Ford has expressed concerns about its intellectual property and hope that any sale of Volvo will respect that property. However, neither China nor Geely is known for respecting IP rights. At all.

This is a very interesting development for both Ford and Volvo. In situations like these, we try to put emotion aside, wanting only the best for both companies. But in this particular case, we can't help but root for the home team.

[FinancialTimes]

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