Subject: ALERT: Ford, Geely agree to terms on Volvo sale, aim to get deal done in early 2010
Automotive News -- December 23, 2009 -- 6:48 am ET
MUNICH -- Ford Motor Co. expects to sign an agreement to sell its Volvo
car unit to China's Zhejiang Geely Holding Group by the first quarter of
2010 and close the deal in the second quarter.
Ford said all of the accord's key commercial terms have been settled.
Ford added that work still needs to be done before the deal is
completed, such as Geely securing its financing and getting approvals
from the Chinese government.
In a statement, Ford said that 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."
For Ford, closing the sale would provide it with cash it could use
toward CEO Alan Mulally's goal of speeding up debt repayment as the
automaker moves toward profitability it has projected for 2011.
Ford, which last posted an annual profit in 2005, was the only U.S.
automaker to avoid bankruptcy and a U.S. government bailout thanks to
the $27 billion borrowing program it completed before the crushing
decline for the U.S. auto market that began in 2008.
A successful sale would unwind European acquisitions made since the late
1980s. Ford sold Aston Martin in 2007 and Jaguar and Land Rover last
year.
No stake in Volvo
While Ford will continue to cooperate with Volvo in several areas after
the sale, Ford does not intend to retain a shareholding in the business
once the deal is finalized.
Chinese carmakers are taking advantage of a crisis-sparked shake-up of
the auto industry, tapping into Western brands in a bid to boost their
technology and take advantage of a fast-growing home market. China car
sales are expected to overtake the United States for No. 1 in the world
when full-year figures are published.
Zhejiang Geely, the parent of publicly traded Geely Automotive, was
named by Ford as preferred bidder for Volvo in October.
The estimated $1.8 billion deal would be the largest overseas
acquisition by a Chinese automaker.
Ford paid $6.45 billion for Volvo in 1999.
Ford wrote down the value of Volvo by $2.4 billion following a review of
the brand's prospects in January 2008.
Reuters contributed to this report.
You can reach Douglas A. Bolduc at dbolduc@crain.com.
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