Ford Motor reached an agreement on Sunday to sell its Volvo subsidiary to a Chinese conglomerate, in the clearest confirmation yet of China’s global ambitions in the auto industry. Zhejiang Geely Holding Group, based in Hangzhou, agreed to pay $1.8 billion for Volvo, with $1.6 billion in cash and the rest in a note payable to Ford.Rico says Volvo also means 'wolf' in Swedish, but the 'to roll' definition is probably the one they'll choose...
The sale of one of Europe’s most storied brands shows how China has emerged not just as the world’s largest auto market in the past year, but also as a country determined to capture market share around the globe. Zhejiang Geely said it planned to retain production of Volvo cars in Sweden, but it is expected to build another assembly plant for them in China, most likely near Beijing or Shanghai. Ford already builds small numbers of Volvos for the Chinese market at an assembly plant in Chongqing. Most of the vehicles output at that factory are Fords and Mazdas for sale in China.
Zhejiang Geely’s majority-owned automotive subsidiary, Geely Automobile Holdings, is China’s twelfth-largest automaker, based on production so far this year. But it is China’s second-largest automaker, after BYD Group, that is not at least partly state-owned.
Michael Dunne, an independent auto analyst based in Bangkok, said that acquiring a well-known brand name was the fastest way for a company like Geely Auto to move up from making affordable cars for the masses to manufacturing respected cars for the affluent. “This is all about Geely’s efforts to bust out of the basement,” Mr. Dunne said. “Volvo happens to be available.”
Many automakers in China are loaded with ambition, but Geely Auto stands out even by Chinese standards. While making most of its money on inexpensive compacts and subcompacts, it has turned heads at auto shows with ambitious concept cars that look like Western sports cars and even Rolls Royces.
The parent company has said repeatedly that it planned to keep Volvo as a separate unit from Geely Auto. The company has promised to retain Volvo’s existing management, but said it has already hired several executives with international automotive experience to help it oversee the new subsidiary. Zhejiang Geely is dominated by its founder, Li Shufu, the son of farmers from Taizhou, in southeastern China, who turned a small business manufacturing motorcycle parts there into one of China’s fastest-growing companies. “I want to emphasize that Volvo is Volvo and Geely is Geely. Volvo will be run by Volvo management,” Mr. Li said at a news conference in Goteborg, Sweden, on Sunday. “We are determined to preserve the distinct identity of the Volvo brand.”
Having been scared last year by the near-collapse of Saab, the Swedish government has acquiesced to the sale of Volvo to an apparently well-heeled Chinese buyer. “The future road for Volvo Cars is now defined,” said Maud Olofsson, the Swedish deputy prime minister and minister for enterprise and energy. “Regardless of who owns Volvo Cars, its brand will still be Swedish.”
The deal is scheduled to close in the third quarter of this year, but raises issues of technology and brands that will last for years. In the eleven years that Ford has owned Volvo Cars, it has closely integrated the two companies’ designs, so that their cars now share many parts. Lewis W.K. Booth, Ford’s chief financial officer, said that Ford would continue to supply Geely with engines, stamped steel body parts, and other components for a period of time he did not specify.
Yale Zhang, the director of greater China vehicle forecasts for CSM Worldwide, an international consulting firm, said that the acquisition would benefit Geely Auto’s image at home, because many Chinese were likely to take pride in the acquisition of such a famous brand by a Chinese company. But Zhejiang Geely may also face a difficult time in becoming a multinational concern, since it has focused mostly on its domestic market up to now. “It will help Geely’s brand, that’s for sure,” Mr. Zhang said. “The challenges and the risks are equal to the opportunity.”
28 March 2010
How do you say "to roll" in Chinese?
In a buying frenzy with all the money we keep sending them, the Chinese are now buying Volvo from Ford; the Swedes are probably not happy (but, being Swedes, how could you tell?). Keith Bradsher has an article in The New York Times:
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