10-28-2009, 08:51 PM
Join Date: Jul 2004
Location: Redmond, WA
The Wall Street Journal
By NORIHIKO SHIROUZU
BEIJING— Ford Motor Co. has selected a group led by China's Geely Holding Group Co. as the preferred bidder for the U.S. company's Volvo unit, marking an important step forward for what would be the most ambitious international expansion so far by a Chinese car maker.
Wednesday's announcement means that Ford and Geely, one of China's biggest privately owned auto makers, are in exclusive negotiations over Volvo, but it doesn't ensure that the companies will reach a deal. A senior Geely executive said it isn't clear how much longer negotiations might last.
Still, Ford's decision is the strongest sign of progress in Geely's years-long pursuit of Volvo, which Ford acquired in 1999 for $6.4 billion and which it decided to sell last year amid losses at the Swedish unit. The decision comes amid concerns in Sweden about the potential fate of Volvo under Geely ownership and follows recent tension in talks between Ford and Geely over how to handle certain intellectual-property rights in any sale.
In a statement, Geely stressed that it is committed to maintaining Volvo's existing production and research facilities, as well as union agreements and dealer networks, and said that the company would remain headquartered in Gothenburg, Sweden, and be led by independent management. Geely, which said its bid is supported by Chinese banks, also promised to "enhance Volvo's access to sales networks and sourcing opportunities" in China's fast-growing market.
"We are delighted with the progress of our discussions with Ford," Li Shufu, founder and chairman of Geely, said in a statement. "Should a final agreement be reached, Geely will safeguard and strengthen Volvo's world-renowned brand heritage, ensuring its continued leadership as a premium car company with a global reputation for safety and environmental technologies."
Volvo welcomed Ford's decision. "It's good for us to have a clear indication of where the process is going so we can move forward," said Volvo Cars spokeswoman Maria Bohlin.
US auto giant Ford said on October 28, 2009 that China's largest independent carmaker Geely Automobile is its "preferred bidder" in talks over the sale of Swedish unit Volvo.
.Lewis Booth, Ford's chief financial officer, said in a statement that "Ford believes Geely has the potential to be a responsible future owner of Volvo and to take the business forward while preserving its core values and the independence of the Swedish brand." But he added that "there is much work that needs to be completed" and that "we have no specific timeline to conclude the discussions."
Ford said it doesn't plan to keep a stake in Volvo after any sale, although it would continue to cooperate with the Swedish company.
The Geely bid had recently been in danger of stalling over the intellectual-property issue, according to people familiar with the talks. At issue were questions over which technology Ford would transfer to Geely and at what price, as well as how the two companies would handle any possible disputes over technology down the road.
It isn't clear whether those questions have been entirely resolved. But a senior Geely executive said the two companies had made progress on key issues. Geely's negotiators returned to China over the weekend from Europe, where they held talks with Ford representatives.
Geely's bid is the most prominent part of a broader push by Chinese companies, many of them cash-rich, to acquire foreign brands and technology at a time when established car companies elsewhere have struggled.
Sweden's other major car brand, General Motors Co.'s Saab, is also involved in a deal involving a Chinese company. Earlier this year, Beijing Automotive Industry Holding Co. agreed to take a minority stake in Swedish sports-car maker Koenigsegg Group AB, a consortium that includes Koenigsegg Automotive founder Christian von Koenigsegg , and help the group fund a bid for Saab. Beijing Auto aims to gain access to Saab's vehicle technology—much of which comes from GM and its Opel unit—in return for helping to revive Saab by increasing its sales in China.
Geely, whose Geely Automobile Holdings Ltd. unit lists shares in Hong Kong, aims to use its Chinese engineers to conduct basic engineering tasks for Volvo like generating digital blueprints of parts designed by more seasoned engineers in Sweden, according to people familiar with Geely's plans. It has hired consultants to advise it on the acquisition, including a former top executive at Volvo.
The head of the engineering union at Volvo Cars said Wednesday he had concerns about the Geely bid. Magnus Sundemo in a telephone interview he was uneasy about another foreign owner of Volvo and questioned whether Geely would take the time to understand the company's culture and invest in the brand.