Ford, Geely Agree on Volvo sale terms

[Plex]

Ford has finally done it - it has secured a deal to sell off its Volvo Cars division.

The Detroit-based automaker has drafted a deal with Chinese Zhejiang Geely Holding Group to buy the Swedish brand in the second quarter of 2010. Ford has said that all the key terms of the deal have been agreed upon. But Geely still has to secure financing for the purchase and obtain approval from Chinese regulators.

Ford released a statement on the sale saying it would ensure Volvo's future and that Ford will be focusing on its ONE Ford strategy of strengthening the brand's global presence.

With the sale Ford will not retain any ownership of Volvo but will continue to cooperate with the brand on certain projects, the company said.

For Geely Automotive, a subsidiary of the holding group, the purchase provides it with advanced automotive technology and a valuable inroad into Western markets for a Chinese automaker.

Geely will be acquiring Volvo for an estimated $1.8 billion (1.26 billion euros). Ford bought Volvo for $6.45 billion (4.5 billion euros) back in 1999.

Worldcarfans

[Plex]

Ford agrees to sell Volvo to Geely for $1.8B

Chinese car producer Geely has agreed to purchase Swedish automaker Volvo from Ford for $1.8 billion. The sum is a far cry from the $6.45 billion Ford spent to acquire Volvo in 1999.

The deal was signed on Sunday at the Gothenburg, Sweden, offices of Volvo. Because the two firms need regulatory approval in several countries, the agreement is not expected to be finalized until October.

Geely's binding deal requires them to pay $1.6 billion in cash up front, with the remaining $200 million to be paid in the future. It gives Ford the opportunity to focus on its core brand, as well as Lincoln and Mercury.

"For Ford, the completion of the sale of Volvo Cars will conclude the divestiture of our global premium brand portfolio, allowing us to concentrate further on integrating the Ford core brand globally as we continue to execute our One Ford plan," said Ford CFO Lewis Booth.

This is Ford's fourth brand sale in recent times. The company sold Aston Martin in 2007, and both Land Rover and Jaguar in 2008.

Geely will take over a brand that lost $934 million in 2009, and $1.7 billion a year earlier. The company believes they will be able to turn Volvo around by giving the luxury brand an immediate foothold in the Chinese market.

The new owners say they do not plan to move Volvo out of Sweden any time soon. Volvo employs 14,000 people in Sweden, and another 6,000 elsewhere.

“I see Volvo as a tiger. It belongs to the forest and shouldn’t be contained in the zoo,” said Geely chair Li Shufu in Mandarin. Referring to Volvo's main factories, Li said, “The heart of the tiger is in Sweden and Belgium. ... Its paws should extend all across the world.”

Volvo production is expected to hit 390,000 units in 2010, up from 330,000 in 2009.

Worldcarfans