After months of negotiations and numerous trips to the bargaining table, Ford has finally brokered a deal to sell Volvo to Chinese automaker Geely. According to a Ford press release, an official agreement will be signed by Ford and Geely in the first quarter of 2010, with the sale to close in the following quarter, provided that financing arrangements and approvals by various regulatory agencies stay on-pace.
Neither party has yet discussed specifics of the sale. However, we know that Ford bought Volvo for around $6 billion in 1999, and since most of the rumors surrounding these negotiations set Geely's bid between $2 billion and $3 billion, the sale is likely to represent a big cash loss for Ford. It's also safe to assume that Ford's concerns over intellectual property rights have now been addressed, as has Ford's wish to see Volvo's base of production remain in Europe (even though Geely has already begun expanding its resources in China). We also gather that the American investment consortium known as Crown was unable to make a compelling offer.
There isn't much new information included in Ford's press release (pasted below), but halfway down, we do find this little nugget: "While Ford would continue to cooperate with Volvo Cars in several areas after a possible sale, the company does not intend to retain a shareholding in the business post-sale." That decision is in keeping with the "ONE Ford" strategy that the company has employed the past few years -- a policy that prioritizes focus on Ford's core operations. Such a streamlined, cautious approach is smart these days, considering the instability in the international economy; however, given China's surging auto market -- which has grown 45% in 2009 -- there might've been some advantages to obtaining a share of Geely/Volvo.
In a brutal year that's seen the demise of so many brands -- some that needed shuttering, others that did so prematurely -- it's nice to close out 2009 on an up note, don't you think?
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Ford Confirms Settlement of All Substantive Commercial Terms to Sell Volvo to Geely in 2010
DEARBORN, Mich., Dec. 23 /PRNewswire-FirstCall/ -- Ford Motor Company (NYSE: F) confirmed today that all substantive commercial terms relating to the potential sale of Volvo Car Corporation have been settled between Ford and Zhejiang Geely Holding Group Company Limited.
While some work still remains to be completed before signing - including final documentation, financing and government approvals - 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 prospective sale would ensure Volvo has the resources, including the capital investment, necessary to further strengthen the business and build its global franchise, while enabling Ford to continue to focus on and implement its core ONE Ford strategy.
While Ford would continue to cooperate with Volvo Cars in several areas after a possible sale, the company does not intend to retain a shareholding in the business post-sale.
More details will be made available once the expected definitive sale agreement is signed in the first quarter of 2010.
Ford Motor Company, a global automotive industry leader based in Dearborn, Michigan, United States, manufactures or distributes automobiles in 200 markets across six continents. With about 230,000 employees and about 100 plants worldwide, the company's core and affiliated automotive brands include Ford, Lincoln, Mercury, Volvo and Mazda. The company provides financial services through Ford Motor Credit Company. For more information regarding Ford's products, please visit www.ford.com.