Ford to finalise Volvo sale to Zhejiang Geely Holding next week

By Brett Davis | July 29th, 2010

Ford has almost completed the sale of Volvo to China’s Zhejiang Geely Holding Co. for US$1.8 billion. The sale is expected to be finalised next week.

It’s not a matter of how much money Ford will profit from selling the Swedish company, it’s a matter of how much Ford will lose as it prepares to finalise the deal for one third of the price it originally bought the company for in 1999.

The deal is said to be part of Ford Motor Company’s plans to remove itself from all European luxury brands. Since Chief Executive Officer of Ford, Alan Mulally joined the company in 2006, his strategy has long since been selling brands like Aston Martin, Land Rover and Jaguar. Ford has reported these European brands didn’t generate the kind of sales and profits initially projected.

Although the independence presented by the sale may suggest Volvo will be releasing all-new models in the futre, Ford will continue to provide Geely with engines, transmissions and other major foundations. Ford is also reported to have offered engineering and technical support to Geely for an unknown period.

Robert

Smart deal this one. Lost an absolute motza from initial purchase price! Maybe Ford is in the ALP here….same mentality!

Joker

No, that would be GM
Ezz

The Young Liberals have been mobilised to monitor car sites…rah rah.
RK

Um, the stupidity was when they bought Volvo at a stupid price because of the market bubble, not selling it at a reasonable price now. But that concept would be beyond someone trying to score lame political points on a car site.
The Realist

The Labor minions are out in force here… or do the plebs above vote for the Greens?

Verbatim

Same thing.
I dont get how people dont realise that a vote Greens IS just a vote for Labor.
WASTED VOTE people!

greenroom

.. and no one’s wearing a hat.
Jonno Smith

FORD is ruled by money-pinching bean counters (or accountants) and not car marketers. Hard to imagine what were they thinking then when they bought Aston Martin, Land Rover, Jaguar and Volvo…”Ford has reported these European brands didn’t generate the kind of sales and profits initially projected.” LOL! you don’t expect luxury car brands to generate lots of sales, do you! For example, Aston Martin is still being hand built – how many can you built by hand in a day to generate the kind of sales FORD expects?
“…Ford Motor Company’s plans to remove itself from all European luxury brands.” How is it that Volkswagen AG managed to improve Lamborghini, Bugatti and Bentley successfully and globally using it’s corporate resources and yet FORD failed miserably with Aston Martin, Land Rover, Jaguar and Volvo? This would be a great research project for budding car researchers or analysts.
Cheers!

Verbatim

Sorry Jonno but you are wrong on so many levels.
Ech and every one of the brands that passed through the Ford empire is now a better company with better product lines and bottom lines.
And what everyone fails to recognise is the ongoing business that Ford has generated through these companies with the long term ongoing supply of engineering services, components and royalties.

Jonno Smith

If I’m a significant FordMoCo shareholder or for that matter, the Ford family owner – I sure wouldn’t be very happy about the deal although there’s nothing I could do about it since it has dragged corporate profits down! It’s a simple destruction of shareholder’s value by the management. These brands that, “..passed through the Ford empire is now a better company with better product lines and bottom lines.” – For whom? Definitely not Ford, but for the purchasers – Tata (Jaguar & Land Rover) & Geely (Volvo)! Ford is sowing the seeds of its own destruction by passing car technology to emerging industrializing countries (like China & India).

Jonno Smith

“..And what everyone fails to recognise is the ongoing business that Ford has generated through these companies with the long term ongoing supply of engineering services, components and royalties.”
Suppliers of auto parts and services are subjected to immense pressures of price reductions and rollbacks by the auto company. The recent Japanese manufacturers factory recalls by Mitsubishi and Toyota are symptoms of suppliers failures due to price pressures.

ohreally

This sale is a joke.

Is Geely really one individual car company? Considering the entire chinese car industry has mentioned its going to share much of their technology, in one purchase they have caught up on 20 years of engineering know how.

China’s going to dominate the car market in next to no time now.
Mick

Looks like Volvo can get some of that great Chinese quality into their cars. I’m still amazed the Great Wall ute can be sold here, if we made a car with that level of safety in Australia it wouldn’t be allowed on the roads, how come imported cars have a different requirement?

Actually its the same with anything, but I really don’t think imported cars and food should have different standards than Australian cars and food. After you have finished munching down on your ‘healthy’ lunch made from Chinese vegetables and tinned oysters grown in water contaminated with heavy metals, you can hope in your Chinese made Great wall, or potentially in the future Chinese made Volvo, and go for a drive. At least then you have the opportuning from dying from cancers or something else ralted to the food or dying from having a crash in a tin can. Maybe you can sit in the back, so you can have the joy of a lap belt only in the back row…

Actually out of all the Chinese manufacturers Geely would probably be one of the best from what I’ve heard, I’m not having an attack on them! I’m just making a general comment that safety and reliability shouldn’t be compromised just because we have different standards levels for ourselves and imports.

shag

Without China you won’t be able to make this stupid comment because the computer you were using is made in China

SubPrime

The Chinese might as well buy Ford too……
Ezz

The purchase of these euro luxury brands has been a benefit to Ford in regards to component sharing and quality. Whether or not that was worth the dollars is arguable. I suspect they will continue to benefit in the future with some agreements in place to ensure this.
Andrew M

Brett, it actually is about how much money Ford raise from this sale, and not about the loss as you say.

The loss was paid for long time ago, now every dollar raised is a dollar raised. Ford Already has pretty low debt, so a couple of billion really gives them some flow to focus on furthering their business plan.

There comes a point where one has to cut their losses, and if they just sat around and cried over it rather than taking the positive points from it they would get nowhere.

And also, not only is it 1.8Bill from the sale, but they will also make money from selling parts and technical stuff once geely take hold.
Who knows, the true value of the sale once you factor that Volvo will become their customer may be very beneficial
Save it for the track

The chinese will simply make the parts they need themselves.