Money Matters, Simplified.
Ford to sell Volvo to Geely
by Jaspreet Virk - December 23, 2009 - comments
The two companies have yet to finalize the deal. A sale agreement is expected to be signed in the first quarter, and the sale is anticipated to be completed in the second quarter.
New York, December 23 -- In a move towards cutting losses, Ford Motor Co. has announced that it is selling its Swedish business, Volvo Cars, to China's Geely.
Confirming the deal, the company stated that “all substantive commercial terms relating to the potential sale of Volvo Car Corporation have been settled.”
The U.S. automaker’s Volvo Cars unit has been incurring losses for long, and Ford had put it on sale a year ago to help pay off its debts.
“The prospective sale would ensure Volvo has the resources, including the capital investment, necessary to further strengthen the business and build its global franchise, while enabling Ford to continue to focus on and implement its core One Ford strategy,” Ford stated.
Deal in the process of finalization
The two companies have yet to finalize the deal. A sale agreement is expected to be signed in the first quarter, and the sale is anticipated to be completed by the second quarter.
In return for acquiring Ford’s Volvo car unit, Geely is expected to pay the U.S. automaker about $2 billion.
Ford has already started working to resolve all issues like intellectual property, etc. to facilitate the sale.
On the other hand, Geely will be seeking support from the Chinese government to acquire Volvo. Also, the company is seeking help from Germany-based Roland Berger Strategy Consultants to reorganize the loss making unit.
If the deal is finalized, it will give Geely a strong footing in other markets and also an insight into Western vehicle development and manufacturing.
Likewise, “Chinese market could be an opportunity for Volvo. It's a well-known brand, has a good heritage and a range of products that should appeal to the Chinese consumer," Nomura's auto specialist, Michael Tyndall, told BBC News.