Money Matters, Simplified.
UPDATE: China’s Geely buys Volvo for $1.8 bln
by Samia Sehgal - March 28, 2010 - comments
Acquisition of Volvo Cars will allow the Chinese automaker to strengthen its presence in the European market
Chinese carmaker Zhejiang Geely Holding has signed a deal to buy the troubled Volvo Cars from U.S. auto giant Ford for $1.8 billion.
"I can confirm that a final agreement on the sale of Volvo to Geely was signed at 2:40 pm," said Per-Ake Froberg, a spokesman for Volvo Cars.
Later, a news conference was held at Volvo headquarters in Goteborg, on Sweden's west coast, where representatives of the two companies said that regulatory approvals are required before the deal is complete.
The transaction, to be made through a $200 million note and the rest in cash, is expected to be through by the third quarter.
”China, the largest car market in the world, will become Volvo's second home market.” -- Li Shufu, Geely's chairman
The main terms of Volvo’s sale to Geely were agreed upon in December.
Ford sells Volvo for a third of purchase price
Since 2008, Ford has been looking to sell off its troubled Volvo unit to be able to better manage its core Ford, Lincoln, and Mercury brands.
However, the sale is bringing Ford only one third of the $6.4 billion it had paid for the premium Swedish brand in 1999.
Around 22,000 people are currently employed with Volvo across the world, and more than half of them are in Sweden.
Several unions at the company were initially against the deal due to concerns over possible-layoffs and the ambiguity on expansion plans.
Earlier this week, three unions had demanded details “on the capital that will finance Volvo's daily activities, investment on future projects and the production target of 600,000 vehicles by 2015.” However, by Saturday, they were content.
Geely secures finances for the deal
Geely has, meanwhile, secured the financing required to see the deal through, as well as “significant working capital facilities to fund Volvo Cars' ongoing business.”
One of China's largest private carmakers also said that while it intends to keep Volvo's existing manufacturing facilities in Sweden and Belgium, the company will also be looking for possibilities of manufacturing in China.
"China, the largest car market in the world, will become Volvo's second home market. Volvo will be uniquely positioned as a world-leading premium brand, tapping into the opportunities in the fast-growing China market," said Li Shufu, Geely's chairman.
West selling, Asia buying
Automakers in the west are looking to shed their unprofitable units and Asia is providing most buyers.
India's Tata Motors Ltd. bought Jaguar and Land Rover brands from Ford Motors in 2008. Tata paid $1.7 billion for the units, only a third of the price Ford had paid for them.