Ford expected to close on Volvo sale to Geely next week

ERJ staff report (AN)

(Bloomberg) -- Ford Motor Co. plans to complete its sale of Volvo Cars to China's Zhejiang Geely Holding Co. next week, finishing the US automaker's exit from European luxury brands, according to two people familiar with the plans.

Ford is selling Volvo to Geely for $1.8 billion, less than one-third of what it paid for the Swedish automaker in 1999. Ford and Geely executives are aiming to close the sale next week, pending final regulatory approvals and financing, said the people, who asked not to be identified revealing internal plans.

Unloading Volvo would complete Chief Executive Officer Alan Mulally's strategy of exiting European luxury lines to focus on Ford's namesake brand. Since arriving from Boeing Co. in 2006, Mulally has sold Aston Martin, Land Rover and Jaguar, which Ford acquired in 1989 as the first of a stable of premium nameplates that failed to generate the profits the automaker expected.

“Any time you're marrying a commoner to a blueblood, that marriage is going to be hard to maintain and sustain,” said Rebecca Lindland, an analyst for IHS Automotive in Lexington, Mass. “It's a shame because the Volvo-Ford marriage was one of the strongest because their car buyers had similar characteristics.”

Volvo profit

Volvo had pretax profit of $53 million in the second quarter, compared with a $237 million loss a year earlier, Ford said last week. Ford, the only major US automaker to avoid bankruptcy last year, posted net income of $2.6 billion in the second quarter, exceeding analysts' estimates by 66 percent.

“We expect to complete the Volvo sale in the third quarter,” John Gardiner, a Ford spokesman, said in an e-mail. He declined to comment on whether the sale will close next week.

Tim Burt, a London-based spokesman for Geely, declined to comment on the timing of the completion.

Ford has said it will continue to supply Volvo with engines, transmissions and other vehicle components. It also agreed to provide engineering and technology support and access to tooling for common components for an unspecified period.

The Swedish carmaker's S40 model is built on the mechanical foundation of the Ford Focus now sold in Europe. Volvo supplies diesel engines for Ford's European lineup.

“They'll probably wind that down over time,” Lindland said of the technology and parts-sharing agreement with Volvo. “Mulally runs a pretty tight ship. And that's obviously working out really well since they're making billions in a really crappy market.”

From Automotive News (A Crain publication)