The Dog that Didn't Bark: No Political Fallout as Geely Buys Volvo
Maybe Congress is tired after the health care fight. Maybe U.S.-owned Volvo just isn't important enough. Maybe the importance of Ford's (F) recovery is trumping all other considerations.
Whatever the case, it's amazing that as far as I can tell, the sale of Volvo to a Chinese company appears to be proceeding without a political hitch. Ford and Geely (whose proper name is Zhejiang Geely Holding Group Co. Ltd.) announced on March 28 that Geely will purchase Volvo for $1.8 billion.
After all, when foreign companies buy significant U.S. assets, they can often run into opposition. Dubai Ports, for example, eventually withdrew its bid in 2006 to buy a number of U.S. ports when then-Senator Barack Obama, among others, questioned the deal. And China's state-owned oil company, CNOOC, saw one of the uglier faces of the U.S. Congress in 2005, when it blocked the proposed $18.5 billion acquisition of a California oil firm, Unocal, for $18.5 billion. CNOOC dropped the bid. Moreover, China is in a high-profile dispute with Google over Internet censorship and is under more or less continuous U.S. criticism about its currency policies. Geely is also on close terms with the Cuban government, with whom the U.S. does not have diplomatic relations. On Geely's web site, the Volvo purchase shares the company's "news and events" page with a recent mission by Cuban tourism officials, including Tourism Minister Manuel Marrero Cruz (photo). Geely cars are already on the streets in Cuba, and the government appears to be interested in purchasing more Geely vehicles for use in Cuba's tiny but growing tourist trade.
Any of these factors could have been used as a pretext to make Geely's bid difficult. Even so, Ford and Geely have been circling each other for months to finalize the sale. If any American politicians or their constituents objected to Chinese ownership before now, they haven't made much noise about it.
Ford said in its announcement that it will not retain any ownership in Volvo. In fact, the sale will not be quite as cut-and-dried as that.
Ford will continue to supply Volvo Cars with engines, transmissions and other components. Ford said it will also provide engineering support, information technology, access to tooling for common components, and other services for a transition period that was not publicly specified. In turn, Ford uses safety features in its cars that were developed by Volvo.
The purchase of Volvo is a giant step up for Geely's overseas business. According to the company, Geely's overseas distribution until now has been limited to Russia, Turkey, Nepal, Venezuela, Ukraine, Chile and Uruguay. Volvo may be a niche player in mature markets like Japan, Europe and the United States, but its global presence is big-time compared to Uruguay.
The lack of controversy over the Volvo sale is another sign that times sure have changed from the days of "ping-pong diplomacy," where any U.S. interaction with China was trivial, rare and controversial.
More on the Volvo sale on BNET Photo: Geely