China’s Zhejiang Geely Holding Company is on track to complete its purchase of Volvo Cars from Ford Motor Company next week, thus ending Ford’s part in the European luxury vehicle market. This latest news of the completion of the sale comes from two people familiar with the deal.
Volvo will go to Geely for $1.8 billion, which is less than one third of what Ford paid for the Swedish automaker back in 1999. Executives from Ford and Geely expect to finalize the sale next week, pending financing and regulatory approvals, say the sources, who requested not to be identified.
Dumping Volvo Cars would be the final step in CEO Alan Mulally’s plan to leave the European luxury auto market to focus more heavily on the Ford brand. Mulally has so far sold off Aston Martin, Land Rover and Jaguar since his arrival from Boeing Company just 4 years ago. The brands never were the profit-makers Ford expected them to be.
Analyst for HIS Automotive in Lexington, Massachusetts, Rebecca Lindland, said, “Any time you’re marrying a commoner to a blueblood, that marriage is going to be hard to maintain and sustain. It’s a shame, because the Volvo-Ford marriage was one of the strongest because their car buyers had similar characteristics.”
Ford reported last week that Volvo had $53 million in pretax profit in the second quarter, up from a $237 million loss the previous year. Ford posted a net income of $2.6 billion in the second quarter, overshooting analysts’ predictions by 66 percent. Ford is the only major U.S. automaker to keep itself out of bankruptcy last year.
Ford spokesman John Gardiner said in an email, “We expect to complete the Volvo sale in the third quarter.” He did not, however, say that it would finalize next week. Geely spokesman Tim Burt of London would not comment on the sale timing.
Volvo will continue to receive its supply of engines, transmissions and other components from Ford. The company will also continue support for technology, access to tooling and engineering for common components for the time being.
The Volvo S40 shares its mechanical foundation with the Ford Focus, which is now available in Europe. Volvo supplies engines for Ford’s European diesel models.
Commenting on the parts-sharing and technology agreement between Ford and Geely, Lindland said,
“They’ll probably wind that down over time. Mulally runs a pretty tight ship. And that’s obviously working out really well, since they’re making billions in a really crappy market.”
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