Volvo, for long the bastion of forward-thinking Scandinavian automotive design, is in trouble. Sold to Ford in 1999 for a whopping US$6.4 billion, Ford has been unable to turn a profit and now needs to dump it, much like they dumped Jaguar and Land Rover. But if you found Jag and Land Rover’s sale to India’s TATA Motors horrifying, brace yourself for the latest news from the Blue Oval.
Ford has named a consortium led by China’s Zheijiang Geely Group Holding Company as the preferred bidder for its loss-making Swedish subsidiary, but said more detailed talks were obviously needed before any final agreement will be reached. The announcement moves the long-running sale (which began in December 2008) closer to a conclusion and signals that intellectual property concerns, which have previously threatened to derail the deal, may have been overcome.
But, it could still be months before a final deal is reached. Ford has not disclosed a possible sale price, but media reports have put it closer to US$2 billion than the US$6.4 billion it paid for Volvo in 1999. While a U.S.-led group including former Ford director Michael Dingman, the Crown consortium and Beijing Automotive Industry Holding Corp has also been listed as possible purchasers, Ford has said that they would engage in detailed negotiations with Geely and do not plan on retaining shareholding.
The Geely name may not carry a lot of weight in the local market, but if – or when – this deal does happen, it would be a major coup for the Chinese manufacturer at the end of a remarkable 11-year stretch. What few people may know is that Geely only built its first car in August 1998 and will in 2009 produce around 300 000 cars.
As most of the world’s car manufacturers try to stabilise production volumes and get rid of deadweight expenses, Geely – the largest privately-owned Chinese car company – is growing at an astounding rate. During 2009’s second quarter it grew 33% year-on-year, they have three manufacturing facilities about to be finished (bringing the total up to nine) and, by 2015, they plan to launch 42 new variants…which doesn’t include Volvo.
While the thought of a major brand being owned by a Chinese manufacturer seems frightening, we can only hope that Volvo remains an autonomous unit when it comes to design and manufacturing. For Geely though, it’s an investment worth every Chinese yuan they have, because suddenly they will have access to the very latest powertrain, electrical, safety and production technologies. We may very well have a revolution in the Chinese automobile market – for the better!
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