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Ford To Complete Sale Of Volvo To Geely Next Week

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Ford To Complete Sale Of Volvo To Geely Next Week

Viknesh Vijayenthiran July 29th, 2010

Ford has confirmed back in March that it had reached a definitive agreement to sell Volvo and the Swedish automaker’s related assets to Zhejiang Geely Holding Group Company Limited (Geely). Since that time the sale has been subject to customary closing conditions, including regulatory approvals, but come next week the sale is expected to be finalized.

The purchase price for Volvo and related assets (primarily intellectual property) is $1.8 billion, which will be paid in the form of a note in the amount of $200 million, and the remainder in cash.

Under the terms of the sale, Ford will continue to cooperate with Volvo in several areas in order to ensure a smooth transition, but will not retain any ownership in the Volvo business. Ford will also continue to supply Volvo with powertrains, stampings and other vehicle components for an undisclosed period of time, as well as provide engineering support and access to information technology.

As for Volvo’s intellectual property, co-developed with Ford, the sale agreement will allow Volvo to grant sublicenses to certain portions of this intellectual property to third parties, including Geely. The list most likely includes Volvo’s array of radar-based safety features, PowerShift dual clutch technology and forced-induction powertrain knowledge.

Where the Geely deal would leave Volvo's future lineup is uncertain. The Swedish automaker recently unveiled its 2010 XC60 crossover and a refreshed C70 Convertible, and has the all-new 2011 S60 sedan to come later this year.

Sources close to the Geely have previously revealed that under Chinese ownership Volvo would launch two or three bigger and more luxurious models within the next four years to try and boost global sales, eventually hoping to reach the one million vehicle mark within five years. Volvo currently sells around 400,000 vehicles per year worldwide.

Quite ambitious certainly, but with access to the lucrative Chinese market Geely could build and sell up to 200,000 vehicles per year for sale in China alone.

According to a previous report, Geely also hopes to start production of Volvo cars in a new factory in the Guangdong Province of China. Sources at Volvo have told TheCarConnection.com that a future relationship with China would leave Sweden as the center of product planning, marketing and some initial engineering. Geely's China-based engineers would execute mid-level engineering and manufacturing development at a savings of up to 30 percent from high-cost Sweden. Volvo would also produce a model in a Geely factory in China to expand the brand's global presence, but the goal would be to leverage Volvo's reputation and brand value, teamed with lower-cost Chinese engineering and manufacturing.

In a sad twist of fate for Ford, Volvo finally started to turn a profit after years of losses. In fact, the Swedish automaker had a pretax profit of $53 million in the second quarter, compared with a $237 million loss for the same period a year ago.



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Volvo sale to Geely to close next week?

by Zach Bowman (RSS feed) on Jul 29th 2010 at 4:31PM

Volvo may finally part ways with Ford by the end of next week. The Detroit Free Press reports that the Blue Oval is aiming to close its $1.8 billion sale of the Swedish automaker to Geely in as little as 10 days, though Ford has merely said that its goal is to hand over the Volvo reigns by the end of the third quarter of this year. The move to send Volvo packing is part of Ford CEO Alan Mulally's strategy to slim the company down to focus on its core brands – a scheme that seems to be working so far.

In the meantime, Volvo managed to turn a profit of $53 million before taxes in the second quarter of this year. The news is a big leap from the same time last year – in the second quarter of 2009, the brand lost a heady $237 million. Ford's sale of Volvo seems to have been on glacial pace, partly due to the number of government agencies in the U.S., Europe and China that were needed to sign off on the deal. By the time the ink dries on the last document, Geely will have secured the largest overseas acquisition of any Chinese automaker so far.



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