Today In Brand Sales: Volvo Deal Hits A Snag, HUMMER Probably Dead

March 19, 2010
2010 Hummer H3

2010 Hummer H3

Geely GE or Rolls Royce Phantom?

Geely GE or Rolls Royce Phantom?

Friday usually brings out TCC's optimistic streak, but two news items from Detroit and China have put a cloud over this otherwise sunny day. First, Geely says that its negotiations to buy Volvo from Ford have hit a roadblock, and second, GM has apparently failed to make any progress selling HUMMER to last-minute bidders.

Before we get too dour, we should point out that the obstacles blocking the Volvo sale may be purely temporary. Geely Chairman Li Shufu has indicated that financing for the sale (an earlier sticking point) is now in place, and both Geely and Ford expect to reach a deal before the end of the month. However, the Wall Street Journal says that negotiations have come to a standstill because of "unspecified problems at Ford" -- problems that Geely claims not to understand and that Ford refuses to discuss.

According to Mr. Li, "The situation is changing constantly...and the process of the negotiation is very tough.... We will put as much effort as we can. I hope the deal can be done." Ford spokesman John Gardiner has declined to address the issue directly, saying only that "we expect to sign a sale agreement in the first quarter [of this year]."

So what's the holdup? Well, it could be as simple as a communications glitch or a bureaucratic snafu. Or, as we've mentioned before, it could stem from Ford's ongoing concerns about intellectual property rights -- rights that China and its legal system have a terrible record of protecting. By handing Geely the keys to the Volvo candy store, Ford could lose some important proprietary technology.

Another possibility -- although it's a longshot -- is that Ford is planning to renege on the deal and keep Volvo in its stable. As you've probably noticed, Ford Motor Company is doing very well these days, with a $2.7 billion profit posted for 2009 and a stock price that hit record highs earlier this week. Our own jury is split on the thought of Ford holding on to Volvo: it's a strong brand, but it also seems like a distraction from the company's "One Ford" turnaround strategy. Still, it's within the realm of possibility.

On the GM/HUMMER front, the latest news is that there's no news -- and in this case, no news is not good news for HUMMER fans. Dow Jones Newswires reports that General Motors has made no progress with any of HUMMER's potential buyers.

You might recall that when GM's attempt to sell HUMMER to Sichuan Tengzhong Heavy Industrial Machinery Co. broke down earlier this year, a handful of unnamed parties stepped up to the bargaining table. Apparently, at least one of the offers was good enough to encourage HUMMER CEO Jim Taylor to push back the deadline for a deal to May 1. Unfortunately, it appears that none of the negotiations have panned out, leaving GM to continue winding down the brand.

We're far more pessimistic about HUMMER than we are about Volvo. HUMMER is a niche label, sales have been terrible, and as gas prices creep higher, the gas-guzzlers will likely continue underperforming in showrooms. That's not to say that we won't see a Hail Mary play for HUMMER prior to May 1, we're not making any bets on that pony.

[WSJ, AutoNews]

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