By Mark Huffman
ConsumerAffairs.com
October 28, 2009
Is China poised to become a world automotive power as Detroit fades further into the background? The momentum sure seems to be flowing to the East.
After one Chinese company closed a deal to purchase HUMMER from General Motors, another appears ready to acquire Swedish automaker Volvo, which is principally owned by Ford.
Ford has selected a consortium headed by China's Zhejiang Geely to take over Volvo, which has seen marketshare drop in recent years. But Volvo is expected to be popular in China for the same reason the Hummer is -- its reputation as a durable, but luxurious, automobile.
Volvo has long been a niche favorite in the U.S. among consumers who buy it for its reputation for safety.
Ford said that while it will be engaging in more detailed and focused negotiations with Geely, no final decisions have been made.
"Ford's objective in our discussions with Geely is to secure an agreement that is in the best interests of all the parties," said Lewis Booth, Ford Motor Company executive vice president and chief financial officer. "Any prospective sale would have to ensure that Volvo has the resources, including the capital investment, necessary to further strengthen the business and build its global franchise, while enabling Ford to continue to focus on and implement our core ONE Ford strategy.
Booth said 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. But he noted 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," he said.
While Ford would continue to cooperate with Volvo in several areas after a possible sale, Ford said it does not intend to retain a shareholding in Volvo. Ford says any sale would need to take into account the significant connections between Ford and Volvo in terms of continuing component supply, engineering and manufacturing.
HUMMER finds home in China
Earlier this month GM confirmed that it is spinning off the HUMMER brand to China's Sichuan Tengzhong Heavy Industries.
Under the terms of the definitive agreement, the buyer will acquire the ownership of the HUMMER brand, trademark and trade names, as well as specific IP license rights necessary for the manufacture of HUMMER vehicles. The buyer will also assume the existing dealer agreements relating to HUMMER's dealership network.
Tengzhong intends to purchase HUMMER through an investment entity, in which it will hold an 80 percent stake. Suolang Duoji, a private entrepreneur with holdings that include the Hong Kong-listed thenardite producer Lumena, will hold the remaining 20 percent stake. Financial terms of the agreement were not disclosed.
The transaction is subject to customary closing conditions and regulatory approvals and/or review by government agencies in the U.S. and China. The completion of the definitive agreement enables the companies to continue and further the overall regulatory review process.
