Volvo under Chinese rule, a new life

Volvo under Chinese rule, a new life

 

 

China's Zhejiang Geely Holding Group Co. agreed to buy Volvo cars from Ford Motor Co. on Sunday for $1.8 billion, a landmark agreement designed to vault the Chinese company onto the global automotive stage.

Geely's acquisition of the Swedish brand is the latest example of how China's economic rise is reshaping large swaths of global business, Its huge market and increasingly powerful companies are playing a growing role around the world in industries ranging from cars to natural resources to telecommunications equipment.

The Volvo deal—which comes after China surpassed the U.S. last year as the biggest auto market—puts a Chinese company for the first time in charge of a major global car brand.

"I think Volvo is a tiger," said Geely Chairman Li Shufu, who confirmed that Geely will build Volvos in China. "To liberate the tiger, we need to think on how to uncover the value in Volvo."

The sale marks the latest milestone for Ford Chief Executive Alan Mulally, who has pushed the Dearborn, Mich., company to shed noncore brands in an effort to return Ford to sustainable profitability.

Under the transaction, Ford will receive $1.6 billion in cash and a $200 million note from Geely. Ford, however, will still be obligated to cover some existing Volvo pension plans and debt as well as supply parts to Volvo for years to come.

"We think it's a fair price for a good business," said Ford Chief Financial Officer Lewis Booth said during a press conference at Volvo's headquarters in Gothenburg, Sweden. Ford must use about half its sale proceeds to pay down the $23.5 billion debt the company took on in 2006.

1927 Volvo—Latin for 'I roll'—rolls its first car off an assembly line in Gothenburg, Sweden.

1959 Volvo becomes the first car company to make three-point safety belts standard.

1960 Volvo unveils its first sports car, the P1800

1973 The U.S. becomes Volvo's largest market, ahead of Sweden.

1974 Volvo comes out with a new generation, including the Volvo 240 with six boxy variants.

1980 The first turbocharged Volvo, the 240 Turbo, is shown.

1999 Ford acquires all of Volvo Car Corp. shares for $6.4 billion from AB Volvo.

2002 Volvo introduces its first sport-utility vehicle, the XC90.

January 2008 Geely Chairman Li Shufu expresses formal interest in acquiring Volvo during a meeting with then-Ford Chief Financial Officer Don Leclair after Ford moves to sell noncore brands.

December 2008 Longtime Ford board member John Thornton meets with Mr. Li. Mr. Thornton reports back that the bid should be taken seriously. Later that month, Ford announces it is considering Volvo for sale.

October 2009 Ford chooses Geely as the preferred Volvo bidder.

December 2009 Ford says it has settled all substantive commercial terms for a Volvo sale to Geely. Geely says it has strong Chinese government support for the purchase.

March 28, 2010 Ford announces a deal to sell Volvo to Geely for $1.8 billion.

 

SOURCE: [ Wall Street Journal ]