Chinese car maker gears up to buy Volvo

Published on Wednesday 23 December 2009 20:00

FORD yesterday revealed it is on the verge of selling its loss- making Volvo marque to Chinese group Zhejiang Geely in the latest in a string of Asian investments in Western car makers.

A final deal is expected by the end of June, but Ford said "all substantive commercial terms relating to the potential sale of Volvo have been settled".

Ford named Geely as its preferred bidder for the Swedish marque in October, but no financial terms for the deal were released.

News of the sale comes just days after General Motors revealed it had off-loaded technology from its Saab 9-3 and 9-5 models to Beijing Automotive Industry Holding Company (BAIH).

GM has struggled to find a buyer for the rest of its Swedish brand since Dutch sports car maker Koenigsegg backed away from a potential deal last month.

BAIC yesterday revealed it paid GM $200 million (125m) for the technology, which will allow it to produce Saab-based models as early as 2011.

Dutch luxury car maker Spyker was also in talks to buy Saab, but those negotiations broke down last week, with GM saying it would close down the Swedish marque.

GM is also selling its rugged Hummer brand to construction machinery maker Sichuan Tengzhong Heavy Industrial Machinery Corporation. Both Ford and GM are selling off their "non-core" assets – such as foreign brands Volvo and Saab – to allow the US giants to concentrate on marques sold in their home market.

Ford bought Volvo – renowned for producing the world's safest cars – in 1999 for $6.45 billion but has wanted to offload the firm for the past year. Ford acquired Volvo Cars, while the trucks division carried on trading as a separate Swedish company.

Under Ford's ownership, Volvo continued to shed its "boring and boxy" image and produced award-winning vehicles, including the XC90 sports utility vehicle and the smaller XC60, which this month was named "truck of the year" at the Los Angeles Motor Show.

Volvo spokeswoman Maria Bohlin called the announcement "a step in the process", but noted that the deal "still isn't complete".

Ford said the deal with Geely was still subject to financing and government approval.

Matts Carlson, a motor industry analyst at Goteborg Management Institute, estimated that the price tag for Volvo would be between $2bn and $2.3bn and said a Geely takeover would be good for the Swedish brand.

Carlson added: "Volvo gets a new owner with a lot of money and which I expect will mostly leave it alone because it knows more about vehicle development, sales and distribution."

If his estimate is accurate then the deal would be the largest made by a Chinese car maker.