Ford Nears Sale of Volvo to Chinese Co.

In this image released by the Insurance Institute for Highway Safety, a 2010 Volvo C30 is seen during a roof crush machine pre-test on Oct. 20, 2009, in Virginia. (AP Photo/Insurance Institute for Highway Safety) AP Photo

Ford Motor Co. moved closer Wednesday to selling its loss-making Volvo unit to China's Geely Group, saying a final deal is expected early next year if financing and government approvals fall into place.

If the sale goes through it would be another step in the U.S. auto industry's retrenchment from global operations, and another acquisition of such assets by a Chinese company.

General Motors Co. is selling its rugged Hummer brand to construction machinery maker Sichuan Tengzhong Heavy Industrial Machinery Corp., and China's Beijing Automotive Industry Holdings has agreed to buy some powertrain technology from GM's Swedish Saab unit, which is being closed down unless a buyer is found by year end.

BAIC was also involved in the Swedish consortium Koenigsegg Automotive AB's failed attempt to take over Saab.

Ford acquired Volvo in 1999 for $6.45 billion and has wanted to unload the Swedish carmaker since last year to raise cash and focus its efforts on three core brands: Ford, Lincoln and Mercury.

Work on financing and government approvals remains to be completed, Dearborn, Michigan-based Ford said in a statement, adding it expects to sign the deal in the first quarter of 2010 and close it in the second quarter. The announcement did not reveal the amount of Geely's offer.

For 10 years Ford and Volvo have shared safety and other technology. For instance, Ford's Taurus sedan is based on Volvo underpinnings. Any agreement with Geely is expected to include details about sharing intellectual property rights and engineering.

"The prospective sale would ensure 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 its core ONE Ford strategy," the statement said.

It said Ford expects to cooperate with Volvo Cars after the sale but doesn't intend to maintain a shareholding in Volvo.

In a separate statement, Geely said its negotiations with Ford had deepened since October and that it had also held "constructive" talks with Volvo's management and Swedish union and government officials.

"If a final purchase agreement is signed, as a world famous Swedish car brand, Volvo will continue to lead the trend of world auto technology in safety and environmental protection, and will quickly increase its unique competitive status in the Chinese market," Geely said.

Volvo spokeswoman Maria Bohlin called the announcement "a step in the process," but noted that the deal "still isn't complete."

Auto analyst Matts Carlson estimated the price tag for Volvo at between $2 billion-$2.3 billion and said a Geely takeover would be good for Volvo.

"Volvo gets a new owner with a lot of money and which I expect will mostly leave it alone because it knows more about vehicle development, vehicle sales and vehicle distribution," said Carlson, of the Goteborg Management Institute.

He added Volvo will also get a boost from access to China's fast-growing auto market.
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