$1.8b Volvo Sale to Chinese Automaker Geely Finalized

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When Geely first showed its compact 7151CK sedan at the 2006 North American International Auto Show in Detroit, it had people talking. Some were laughing that the car on display was so poorly made compared to the standards we're used to, but others took notice, particularly Detroit's Big 3 leadership.

"Remember, the first Toyotas were laughable," said General Motors vice chairman and product development chief Bob Lutz to The New York Times. "The first Hyundais that we saw were laughable."

No one is laughing now, as that seemingly incapable Chinese automaker, known officially as Zhejiang Geely Holding Group Company Limited, has just completed the $1.8 billion sale with Ford Motor Company it initiated back in March for Swedish automaker Volvo.

"Volvo is an excellent brand with a strong product line, and it has returned to profits after a successful restructuring. We are confident Volvo has a solid future under Geely's ownership," stated Alan Mulally, Ford's president and CEO, in a press release. "At the same time, the sale of Volvo will allow us to sharpen our focus on the Ford brand around the world and continue to deliver on our One Ford plan serving our customers with the very best cars and trucks in the world."

The same press release states that Geely initiated negotiations with a $200 million note and the balance to be paid in cash, and Monday it paid $1.3 million to finalize the sale. We won't find out the actual price paid until it goes public later this year, as purchase price adjustments will need to be made.

One of the problems that kept negotiations ongoing for months was what to do with intellectual property rights, the Chinese well known for ignoring such issues in the past and Ford having much of its present and future technology integrated into Volvo products. In order to secure the deal, Ford and Geely arrived at an agreement that would see Volvo permitted to grant sub-licenses of specified systems to Geely and third party suppliers.

Suppliers in mind, Ford will continue to provide Volvo with components, from powertrains and stamping systems to individual components for differing durations, depending on the part.

Ford and Volvo have done an admirable job not only keeping the Swedish brand solvent through recent tumultuous market changes, but also introducing new models like the upcoming S60 and V60 sport sedan and sport wagon models, which are destined to increase sales and push the company towards profitability.

"The Volvo team has made tremendous progress in restructuring its business and delivering results during the sale process," said Lewis Booth, Ford executive vice president and chief financial officer. "We believe this agreement will provide Volvo with the necessary resources, including the capital investment, to strengthen the business and to continue to move it forward in the future. We wish Volvo's management team, employees and new owners every success for the future."

Adding to this message is a statement by Stephen Odell, ex-CEO of Volvo Car Corporation who is now returning to Ford as group vice president and Chairman and CEO of Ford Europe.

"Volvo is a proud company with a talented and dedicated team of employees," said Odell. "I am especially pleased that with Ford's continued investment in recent years, Volvo is well positioned for the future with an exciting range of products that remain true to its core values – safety, quality, environmental responsibility and modern Scandinavian design."

Incidentally, Stuart Rowley, ex-CFO of Volvo Cars, is returning to Ford as chief financial officer, Ford Europe.

The new man to head the new Volvo will be former Volkswagen CEO Stefan Jacoby, while headquarters will continue to be Sweden and manufacturing bases in the brand's home country and Belgium.

"I am honoured to join a company with the prestige and growth potential of Volvo," stated Jacoby. "Our employees, suppliers, dealers -- and above all our customers -- can be confident that Volvo will preserve its special status as the industry leader in vehicle safety and innovation -- even as it pursues new market opportunities."

Now that the transaction is finalized, Jacoby will join Volvo's board, chaired by Li Shufu, Chairman of Geely Holding Group.

"This is a historic day for Geely, which is extremely proud to have acquired Volvo Cars," said Li Shufu. "This famous Swedish premium brand will remain true to its core values of safety, quality, environmental care and modern Scandinavian design as it strengthens the existing European and North American markets and expands its presence in China and other emerging markets."

Additionally, Hans-Olov Olsson, a former President and Chief Executive of Volvo Cars and a former Chief Marketing Officer at Ford, will become Vice-Chairman of the board. Other board members include Freeman H. Shen, Hakan Samuelsson, Dr. Herbert Demel, Lone Fonss Schroder, and Winnie Kin Wah Fok.

"The signing and completion of this acquisition reflects the commitment of Ford and Volvo executives to the future of this company, along with the vital input of labour representatives and government officials in Sweden, Belgium and China as well as other relevant countries," added Li Shufu.

©(Copyright Canadian Auto Press)

Topics: Volvo, Geely,

Organizations: Geely, Volvo

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