Geely Gets Volvo

It’s been a while in coming, but has finally officially happened.

It’s been a while in coming, but has finally officially happened. Ford is selling Volvo Car Corp. to Zhejiang Geely Holding Group Company Ltd. All of the paperwork is to be sorted, signed, filed, folded, whatever during the third quarter of 2010.

Ford will be receiving $1.8-billion for the company and its related assets, including intellectual property. There will be a note for $200-million and the balance will be paid in cash—although it will be adjusted to accommodate such things as pension deficits, debt, working capital, etc., so Ford anticipates that “the net effect. . .could be a significant decrease in the cash proceeds to Ford.”

Alan Mulally, Ford president and CEO, stated, “Volvo is a great brand with an excellent product lineup.” Which sort of makes you wonder why they’d sell it. But he went on to say, “The sale of Volvo will allow us to further sharpen our focus on building the Ford brand around the world and continue to deliver on our One Ford plan serving our customers with the very best cars and trucks in the world.” G

And as for the new owners: Li Shufu, chairman of Zhejiang Geely Holding Group Company Ltd., stated, “Zhejiang Geely would like to pay tribute to Ford’s stewardship of the Volvo brand, and we look forward to continued cooperation as Volvo embarks on the next stage of its evolution with Geely.”

Li Shufu, Geely chairman, and Lewis Booth, Ford CFO

Mr. Li Shufu also stated: “This transaction will ensure Volvo's continued leadership in the premium segment, where it enjoys a global reputation for safety and environmental-friendly technologies. This famous Swedish premium brand will remain true to its core values of safety, quality, environmental care and modern Scandinavian design.”

Consider some of those points:

* Premium global brand

* Safety

* Environmental technology

Which leads to the consideration that Ford doesn’t have a premium global brand; it is still reestablishing Lincoln in its home market. It has undoubtedly gotten as good in safety as it has in large part because of Volvo engineers, and while there will be sharing of some things between Ford and Geely, Geely management is undoubtedly going to recognize that that is a competitive advantage so what’s the likelihood that they relinquish any of that? (Think about this: Geely was founded in 1986 and here it is, buying one of the widely recognized brands in the western world.) And while Ford has been working on environmental technology, the Swedes—Volvo and Saab—have really been doing yeoman’s work in that area.