- Oct 10, 2009
@Mods please let this be an independent thread for the first three days then it can be merged with the general news thread.December 24, 2009
Ford Settles Terms in Deal to Sell Volvo
By DAVID JOLLY
PARIS — Ford Motor and Zhejiang Geely Holding Group said Wednesday that they had settled “all substantive commercial terms” on a sale of Volvo, clearing the way for the Chinese automaker to purchase Ford’s Swedish unit.
The U.S. automaker said that while final documentation, financing and government approvals remain to be completed, “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 companies did not disclose a price. “That kind of detail will come when we have a definitive agreement,” said John Gardiner, a Ford spokesman in London.
Ford paid $6 billion in 1999 to buy Volvo; Geely is expected to pay around $2 billion.
Ford announced in October that it had selected Geely as the preferred bidder for Volvo over other contenders.
The joint announcement on Wednesday could ease Geely’s efforts to obtain the necessary approvals in Beijing. The Chinese government must give the green light for big overseas investments to go forward, Mr. Gardiner said.
Geely, based in Hangzhou, said in a statement that it “expects to sign a definitive stock purchase agreement with Ford in the first quarter of 2010.” The company is the largest private automaker in China.
A Volvo deal would mark one of the biggest moves yet by a Chinese car company in Europe or the United States. Beijing Automotive Industry Holding last week agreed to pay $200 million to acquire Saab Automotive carmaking technology from General Motors.
Ford, the only Detroit carmaker to avoid bankruptcy this year, is seeking to raise money as it refocuses on its “core” North American and European operations. It sold Aston Martin to a British-Kuwaiti consortium in 2007, and sold Land Rover and Jaguar to the Indian automaker Tata Motors in 2008. Ford last year also reduced its stake in Mazda Motor, the Japanese carmaker, to 13 percent from 33.4 percent.
Tata’s purchase of Jaguar and Land Rover, however, has turned out to be something of a cautionary tale. The companies continue to lose money and the debt Tata took on to buy them has been a drag on its earnings.
Tata has repaid the debt, but had to raise money by selling shares diluting the stake of existing shareholders, including the Tata Group. Analysts say Tata Motors will have to nurse Jaguar and Land Rover to health for some time to come.
Ford said it would continue to cooperate with Volvo, but it does not intend to retain a stake in the Swedish company.
Geely has sought to assuage anxiety about the deal in Sweden, saying it intends to maintain Volvo much as it is, including “an independent management” at its Goteborg headquarters.
“Geely is committed to working with all stakeholders to complete the transaction in the best interest of all parties,” Li Shufu, the chairman of Geely, said in a statement. The company said it has held “constructive meetings” in recent weeks with Volvo management, labor representatives and government officials in Sweden and Belgium.
Assuming the deal goes through, “Volvo will retain its leadership in safety and environmental technologies, and will be uniquely positioned as a world-leading premium brand to exploit opportunities in the fast-growing China market,” Geely said.
Meanwhile, General Motors is still working to dispose of its own Swedish carmaker, Saab. G.M. said last week that it would shut down Saab, which is based in Trollhattan, after negotiations to sell the company to Spyker Cars, a tiny Dutch automaker, fell through. G.M. said the sale of the older Saab technology to Beijing Automotive would not inhibit a sale.
Although G.M. has already begun the process of closing the company down, Spyker came back this week with a revised offer, and G.M. said it was studying that offer as well as other potential bids. While talks are continuing, analysts say Spyker’s bid appears to be a long shot.
Vikas Bajaj contributed reporting.