On Thursday, a spokesman for China’s Ministry of Commerce said that Zhejiang Geely Holding Group Company’s bid to acquire Ford Motor Company’s Volvo unit was recently approved by that body.
On March 28, Geely agreed to purchase the Volvo car business for $1.8 billion but the sale has been held up pending approval by the Ministry of Commerce. Earlier this year Beijing quashed the sale of General Motors Company’s Hummer division to China’s Sichuan Tengzhong Heavy Industrial Machinery.
The Volvo deal will be the largest single overseas acquisition by a Chinese carmaker and will also fulfill Ford CEO Alan Mulally’s goal of divesting the company of premium European brands. Since taking the helm at Ford in 2006, Mulally has also divested the company of its Aston Martin, Jaguar and Aston Martin divisions.
Geely Automobile Holdings Ltd., which is traded on the Hong Kong market rose 11.3% on news of the Ministry of Commerce’s approval of the sale. The stock closed at HK$2.95 per share after falling by 31% since January. By comparison, the benchmark Hang Seng Index has fallen 3.6% during the period.
Geely spokesman Ning Shuyong was unavailable for comment on the announcement.
According to two people familiar with the matter, Ford hopes to finalize the sale as soon as next week. The sources, who asked not to be identified, said the sale still needs final regulatory approval and funding.
Last week, Ford announced that its Volvo Car division had a second-quarter pretax profit of $53 million compared with a $237 million loss during the same period of 2009. Volvo has approximately 20,000 employees including nearly 14,000 in its home country of Sweden.
Ford has agreed to continue to give technology and engineering support as well as access to some non-sensitive tooling for some components. It will also supply Geely with engines, transmissions and a number of other components for use in its Volvo models for an unspecified period of time.
With its premium European units gone, and Mercury in wind-down mode, Ford will be able to focus more heavily on its Lincoln and namesake brands.
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