Chinese company buys Volvo for $1.8bn
Geely buys Volvo for $1.8bn
By John Reed in Gothenburg and Andrew Ward in Stockholm
Published: March 29 2010 08:53 | Last updated: March 29 2010 08:53
Ford Motor signed a $1.8bn deal to sell its Volvo brand to Geely on Sunday in a move seen as emblematic of the shift in the global car industry’s centre of gravity from the US and western Europe to China.
The transaction, signed in Sweden, will see Zhejiang Geely Holding Group, the parent of the Chinese carmaker, acquire 100 per cent of Volvo and its assets. Geely said the deal would nearly double its sales to 600,000 in five years, largely by building market share in its home country.
The deal marks the largest acquisition of an overseas carmaker yet by a Chinese company, and is China’s biggest foray into ownership of a big luxury brand. Ford and Geely said they expected the deal to close in the third quarter of this year, pending regulatory approvals.
Geely vowed to maintain Volvo’s manufacturing presence in Europe, where it has two car plants in Sweden and one in Belgium, but said China would become “Volvo’s second home market”.
Li Shufu, Geely’s chairman, likened the Gothenburg-based producer of famously safe and solid estate cars and executive sedans to a “tiger” in a zoo that would be freed to pursue new opportunities. “We need to liberate this tiger,” he said.
The deal ends more than a year of uncertainty for Sweden’s car industry since Volvo and Saab were put up for sale by their US owners. General Motors sold Saab to Spyker cars of the Netherlands last month.
Ford said the sale of Volvo would net it “significantly” less cash than the $1.8bn sale price because of adjustments to be made for pension deficits, debt, cash and working capital at the deal’s expected closing date.
Geely, which is mindful of protecting Volvo’s premium image even as it shifts more of its operations to China, said it intended to run the Swedish carmaker as a separate company with its own management team based in Gothenburg and a new board of directors.
Ford paid $6.45bn for Volvo in 1999 when it was split from the truck-making group of the same name. It was profitable then, but has lost money ever since.
Geely did not say how it planned to finance the deal but, according to a person briefed on its business plan, it has lined up financing from Chinese state institutions and provinces where it plans to build at least three plants.
FT.com / UK - Geely buys Volvo for $1.8bn
