Ford Finally Sells Volvo

Ford announced yesterday morning that all the major parts of a deal to sell Volvo to Geely have been settled.  They made it clear that details will not be made public yet, but that the deal will be signed in Q1 of 2010 and the sale will be done in Q2.

Many have speculated that Volvo would be sold to Geely and now it is a reality.  Some people seemed concerned about Geely’s resources for the future of Volvo.  When people raised concerns to Ford they responded with “the prospective sale would ensure Volvo has the resources, including the capital investment, necessary to further strengthen the business and build its global franchise.”  Geely is a Chinese car manufacturer and that worries some people as well.  Not known for quality or safety, many question what Geely brings to Volvo.  It seems Volvo brings things for Geely, mainly the safety technology.

With new product just arriving from Volvo (2010 XC60) and more coming soon (new S60) Geely bought Volvo at a decent time.  Some of the model line just received a face lift or is new/coming.  Chinese car companies have not made it into the U.S. and many are afraid this is the beginning to a bad thing.  While that is a valid concern as I mentioned earlier Geely is not known for safety or reliability.  Two things that many car shoppers care about these days.

Twitter was a buzz yesterday morning when the news of the sale hit.  Many Volvo fanatics were angered and saddened.  I even heard some say “There went Volvo.”  We have to examine what happened in a similar situation with Jaguar/Land Rover.  Tata bought the brands from Ford and really did not make many changes.  They liked what planned.  Deciding to take a wait and see approach is not a terrible idea.  So far it has worked for Tata and Jaguar/Land Rover is rolling out refreshed or new product.  Sales are up, and everyone seems to be happy.  If Geely plays things smart, they will let Volvo be themselves and stay somewhat hands off.  If left alone and not interfered with, Volvo could become profitable.

Something to keep in mind about this whole deal is platforms.  Many Fords ride on Volvo platforms.  They share so many, the deal must have clauses in place for platform sharing for at least the foreseeable future until new models arrive.  I assume the platform sharing will cease at in the future.  Other things are shared such as BLIS.  BLIS is Volvo’s blind spot detection system that Volvo developed and uses.  Ford has stated that they intend to work “closely” with Geely in the future.  For how long no one really knows but it can easily be assumed it is because of all the sharing of technology and platforms.

Ford has to be happy right now.  They have no off loaded all the brands in their premier portfolio including Aston Martin, Jaguar/Land Rover, and now Volvo.  They have been trying to sell all of these and have now accomplished just that.  Letting them get the focus back on Ford, Mercury, and Lincoln.

Ford’s press release is below-

PRESS RELEASE:

DEARBORN, Mich., Dec. 23, 2009 – Ford Motor Company [NYSE: F] confirmed today that all substantive commercial terms relating to the potential sale of Volvo Car Corporation have been settled between Ford and Zhejiang Geely Holding Group Company Limited.

While some work still remains to be completed before signing – including final documentation, financing and government approvals – Ford and Geely anticipate that a definitive sale agreement will be signed in the first quarter of 2010, with closing of the sale likely to occur in the second quarter 2010, subject to appropriate regulatory approvals.

The prospective sale would ensure Volvo has the resources, including the capital investment, necessary to further strengthen the business and build its global franchise, while enabling Ford to continue to focus on and implement its core ONE Ford strategy.

While Ford would continue to cooperate with Volvo Cars in several areas after a possible sale, the company does not intend to retain a shareholding in the business post-sale.

More details will be made available once the expected definitive sale agreement is signed in the first quarter of 2010.

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