Geely’s Volvo Purchase Expected to Close This Week

By Chris Haak

Alan Mulally’s “One Ford” strategy is now nearly complete.  After several years of unwinding the Jacques Nasser-era purchases of European luxury brands (first Aston Martin, then Jaguar and Land Rover), the final step is completion of the transaction to sell Sweden’s Volvo to China’s Geely.  And with the approval of China’s powerful Ministry of Commerce, the Volvo deal is expected to close this week.

With the impending closure of Mercury and last year’s divestiture of a controlling stake in Mazda, Ford Motor Company’s portfolio of brands have now shrunk from eight (Mazda, Aston Martin, Volvo, Land Rover, Jaguar, Ford, Lincoln, and Mercury) to just two (Ford and Lincoln).  Too, the removal of regional fiefdoms in Ford’s global structure means that European Fords, Australian Fords, American Fords, and Asian Fords will be more alike than ever before.  Take the 2011 Fiesta, the 2012 Focus, the 2010 Transit Connect, or the upcoming C-Max minivan, for example.

Ford’s former Premier Automotive Group proved to be little more than a distracting money pit for Detroit’s now-hottest automaker.  Ford did derive some technology benefits from its ownership of smaller automakers, such as working with Mazda on the Focus, Fiesta, and Fusion platforms, and utilizing the D3/D4 platform developed by Volvo on the Taurus, MKS, Taurus X, Flex, MKT, and 2011 Explorer.

Over time, the dissolution of these alliances will likely end with each automaker going in its own direction, or entering into a new series of partnerships.  For example, Toyota has agreed to work with Mazda to provide Mazda with hybrid technology, since Mazda can no longer get it easily from the Ford mother ship.

Ford and Geely reached a tentative agreement on the sale of Volvo on March 28, 2010, and said around that time that they expected the deal to close sometime in the third quarter of this year.  The terms of the deal call for Geely to pay Ford about $1.8 billion, primarily in cash, at the time of the deal’s closing.  Due to sensitivity about intellectual property concerns, the companies were very careful in how they mapped out technology sharing.  Following completion of the sale, Ford will continue to supply Volvo Cars with powertrains, stampings and other vehicle components. As part of the sale, Ford also has committed to provide engineering support, information technology, access to tooling for common components, and other selected services for a transition period to ensure a smooth separation process.

Should this deal close – and that appears to be all but a certainty at this point – it will mark the first successful acquisition of a significant western automaker by a Chinese firm.  (We’re not counting Geely’s existing ownership of Manganese Bronze, the firm that makes the black London taxis).  Ford has succeeded in its sale of Volvo where GM failed in its bid to sell Hummer to a nearly-unknown Chinese heavy-equipment manufacturer named Sichuan Tengzhong.  It will be interesting to see what happens to Volvo over the next few years, as Geely sets up local Chinese production and takes control of the company.  It will also be interesting to see what Alan Mulally and his team are able to do at Ford with only two brands to feed instead of eight.  I think we already know part of the answer to that – just look at Ford’s half-year 2010 financial results for a hint.

Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

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