Money Matters - Simplified

Volvo Goes to Geely

Ford announced this week that it would be selling its Swedish brand Volvo to Chinese automaker Geely, emphasizing China’s growing hold in the global auto industry.

Ford confirmed its terms with Zhejiang Geely Holding Group Co. Ltd., and said that all “substantive commercial terms” have been settled. Now all that is left is a sales agreement, which is expected to be signed in the first quarter of 2010. The final closing of the deal is expected for the second quarter.

Geely will not be changing Ford’s style of business though. Ford will not be retaining the shareholding, and will only work for the development of new technology.

China has recently surpassed U.S. to become the world’s largest auto market, selling approximately 13 million vehicles in 2009. Geely’s founder, Li Shu Fu, also known as the Chinese Henry Ford, has sure made Geely a global brand in no time.

Volvo will not only bring resources and capital to Geely, but also global franchise and a big brand name.

The acquisition, the largest purchase of a western brand by a Chinese company, is a big step for China as well. China has always worked hard to improve its technology and intellectual property to make good quality cars, and the new brand is expected to take the Chinese auto industry to higher levels.

The current agreement is also going to give a positive signal to the Chinese government to provide further help to the Chinese car market.