China’s Geely to Buy Volvo, Deal to Close in 2010

Geely’s purchase of Volvo from Ford Motor Company will be completed during the first half of 2010, and underscores the growing power of China as a major player in the global auto industry. The sale of Volvo is the largest acquisition of a Western auto brand by a Chinese company.

Ford says the deal will be signed in the first quarter and will close in the second quarter of 2010. Although it would have been out of the question a few years ago, by the end of this year China is expected to overtake the United States and emerge as the world’s biggest auto market.

The sale of Volvo coincides with General Motors Company’s decision to close Saab and sell intellectual property and assets to Beijing Automotive Industry Holding Corporation (BAIC).

Geely founder, Li Shu Fu, has come to be known as the Chinese Henry Ford and his concentrated efforts have made Geely China’s largest private automaker, well on its way to becoming a global brand.

Chinese car companies have benefited from the growing troubles of U.S. automakers, and have considered buying various assets, especially intellectual property and technology from those struggling companies. So far, the deals have been small and hard to close.

Now Ford says that the deal is well on its way; all major issues have been agreed upon, and they expect this to be a positive sign to the Chinese government, which must give the go ahead. Geely will need to borrow approximately $1 billion from Chinese banks, so approval is necessary.

Ford says of the deal, While some work still remains to be completed before signing¦Ford and Geely anticipate that a definitive sale agreement will be signed in the first quarter of 2010. The deal is valued at about $1.8 billion, which is substantially lower than the $6.45 billion that Ford paid for Volvo in 1999.

Mikael Sallstrom, the labor leader for Volvo had positive comments about the sale. Geely also says that it will maintain Volvo’s production in Sweden. Sallstrom, chairman of IF Metall, said, They said Volvo would remain an independent company¬¶if they live up to what they have promised, it (the sale) will be a positive thing.

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