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Geely gets Ford blessing on Volvo bid

Putting it together: Work goes on at Volvo's Torslanda plant in Sweden as Ford negotiates the sale of Volvo to China's Geely.

Chinese car-maker Geely in the box seat to buy Volvo from Ford

29 Oct 2009

FORD Motor Company has anointed China’s Zhejiang Geely Holding Group as the preferred bidder for its Swedish subsidiary, Volvo Car Corporation.

But Ford cautions that “more detailed and focused negotiations” need to held between the two parties to settle outstanding issues before any deal can be signed.

A major part of those negotiations will almost certainly focus on the thorny issue of intellectual property ownership and access, which has been a sticking point in the sale of other European car companies, including General Motors’ Opel, in the wake of the global financial crisis.

The same issue reportedly also has sent a shiver up Volvo suppliers, who are fearful that a Chinese company might run roughshod over patent rights.

Geely, which is set to begin exporting its own Chinese-made cars to Australia via Perth-based Chinese Automotive Distributors in the first quarter of 2010, is believed to have offered about $US2 billion ($A2.16b) for Volvo – about one-third the price Ford paid for company a decade ago.

Ford has dismissed a reported rival bid from an American-based consortium, Crown, headed by former Ford board member Michael Dingman and former Ford executive Shamel Rushwin.

 center imageLeft: Ford executive vice-president Lewis Booth. Below: Volvo CEO Stephen Odell.

Ford executive vice-president and chief financial officer Lewis Booth said any prospective sale would have to ensure that Volvo had the necessary resources, including the capital, to strengthen the business and build its global franchise.

“Ford believes Geely has the potential to be a responsible future owner of Volvo and to take the business forward while preserving its core values and the independence of the Swedish brand,” he said in a statement released from company headquarters in Dearborn, Michigan.

“But there is much work that needs to be completed in the more substantive discussions that are agreed to take place.

“We have no specific timeline to conclude the discussions.”

Ford says it will continue to cooperate with Volvo in several areas after a possible sale, but does not intend to retain a shareholding in Volvo.

John Fleming, chairman of Ford of Europe and Volvo Cars, said: “Ford fully understands the iconic Swedish nature of the Volvo brand and the responsibility we have as Volvo’s custodian to its employees, local communities and other key stakeholders.

“Any sale also would need to take into account the significant connections between Ford and Volvo in terms of continuing component supply, engineering and manufacturing.”

Volvo CEO Stephen Odell said Volvo’s management team welcomed Ford’s announcement as a positive step forward.

“At Volvo, we are continuing to keep our attention firmly fixed on engineering and building great Volvo cars, to reduce our cost base and to return the business to sustainable profitability at the earliest possible opportunity,” he said.

According to a Bloomberg report from Sweden, a Geely-owned Volvo might lose contracts with some suppliers unless the Chinese car-maker promised to protect patents and not plagiarize products in China.

It quoted the head of a Swedish parts industry peak body, FKG – a group representing 300 automotive suppliers – as saying: “Big, tech-heavy suppliers are definitely concerned about China’s record when it comes to copyrights, and Volvo would be in real trouble if it ends up not being a preferred customer among suppliers.”

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