Geely purchases Volvo for US$1.8 billion

08:21, March 29, 2010      

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China's Geely Holding Group signed a binding deal Sunday to buy Ford Motor s Volvo Cars unit for $1.8 billion, representing a coup for the independent Chinese automaker which is aiming to expand in Europe.
It is another manifestation that a rapidly growing China has set its eyes on valuable assets around the globe.

The purchase gives Geely, in East China's Zhejiang Province, a European luxury car brand with a reputation for safety and quality at a time when China, which last year surpassed the U.S. as the world's largest car market, is eager to improve its competitiveness.

The price, which includes a $200 million note with the remainder to be paid out in cash, is far less than the $6.45 billion Ford paid for the Swedish automaker in 1999. The U.S. automaker has been trying to sell Volvo since late 2008 to focus its resources on managing its core Ford, Lincoln and Mercury brands.

"We think it's a fair price for a good business, and yes, we're happy with the deal we've achieved with Geely," said Ford Chief Financial Officer Lewis Booth Sunday at a news conference at Volvo Cars
headquarters in Goteborg, on Sweden's west coast. Booth added that his company believes that, under Geely, “Volvo can continue to build its business and return to profitability.”

The agreement was signed by Booth and Geely's chairman, Li Shufu, and witnessed by Li Yizhong, the Chinese minister of industry and information technology, as well as Swedish Minister for Enterprise and Energy Maud Olofsson.

In a statement, Geely said it has secured all the financing necessary to complete the deal, as well as “significant working capital facilities to fund Volvo Cars' ongoing business.” The sale is expected to be completed in the third quarter, subject to regulatory approvals.

The deal also covers further agreements on intellectual property rights, supply, and research and development arrangements between Volvo Cars, Geely and Ford. The U.S. automaker has committed to provide engineering support, information technology, access to tooling for common parts and certain other services for a transition period to smooth the separation.

Li, whose comments were translated by an interpreter, described the deal as “a milestone”for both Geely and Volvo, adding that his group will make a Volvo CEO public “in due course.”

Geely said it aims to keep Volvo's existing manufacturing facilities in Sweden and Belgium, but that it also will explore manufacturing opportunities in China.


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