Ford Said to Be in Talks to Sell Volvo Unit to China’s
Geely
By Cathy Chan and Keith Naughton
Feb. 5 (Bloomberg) -- Ford Motor Co., seeking to raise cash to
avoid a federal bailout, is in preliminary talks to sell its Volvo
Cars unit to Geely Automobile Holdings Ltd., according to three
people familiar with the discussions.
Ford will likely get less than the $6.4 billion it paid for Volvo
in 1999, said one of the people, who declined to be identified
because the talks are ongoing. Ford has also approached Chery
Automobile Co. and Chongqing Changan Automobile Co., the people
said.
Dearborn, Michigan-based Ford lost a record $14.6 billion last year
and is trying to avoid asking for government loans to survive as
U.S. auto sales plunge to the lowest level in almost 27 years. A
purchase of Ford’s last European luxury brand would help Geely’s
founder Li Shufu meet his ambition of overseas expansion, even as
the Swedish unit’s sales plummet.
“Li has an entrepreneurial spirit and no fear,” said Asian
automotive analyst Tim Dunne of J.D. Power and Associates in
Westlake Village, California. “He just goes and gets stuff
done.”
Ford spokesman Mark Truby and Geely spokesman Zhang Xiaodong
declined to comment.
Geely’s Approach
Geely first approached Ford about buying Volvo a year ago, before
the Dearborn, Michigan-based automaker had decided to sell its
Swedish auto unit, one of the people said. Preliminary talks with
Geely began in December after Ford said it would consider selling
the unit, the people said.
Geely has received permission from China’s National Development and
Reform Commission to study the acquisition, said the people. The
government agency must sign off on any major merger and acquisition
talks before a company can enter into them.
Volvo has struggled as the global auto market declined and other
automakers made gains in safety technology, a long-time strength
for the Swedish automaker. Volvo’s U.S. sales fell 64 percent last
year. Ford said Volvo had a pretax loss of $736 million in the
fourth quarter.
Jaguar, Land Rover
Last June, Ford sold Jaguar and Land Rover to India’s Tata Motors
Ltd. for $2.4 billion. It sold its Aston Martin luxury line for
$931 million in May of 2007 to a group of investors.
Geely was founded two decades ago by Li, a former farmer who
amassed a net worth of $220 million according to Forbes magazine.
Last year Geely’s sales in China fell 1 percent while the total
market increased 7 percent, according to J.D. Power and Associates.
At the economic forum in Davos last month, Li said Geely’s sales
will rise 25 percent this year.
Ford provides engines to some Volvo cars and the two automakers
share mechanical underpinnings on several models. Any buyer would
have to be assured that Ford will remain healthy enough to provide
those key components to Volvo, the people said.
Geely would likely seek to buy Ford’s entire equity stake in Volvo
rather than negotiate with the Swedish unit over purchases of
specific assets, the people said.
Ford creditors are likely to receive some, or even all, of the
proceeds from any sale of Volvo. Ford pledged Volvo as part of the
collateral it put up for $23 billion in loans it secured in
2006.
To contact the reporter on this story: Cathy Chan in Hong Kong at
kchan14[email protected]; Keith Naughton in Southfield, Michigan at
[email protected]
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