Ford sells its Volvo brand to Geely of China

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Ford has finally decided to get rid of its Volvo brand. The American company got into an agreement to sell Volvo and related assets to Zhejiang Geely Holding Group of China for Rs 815 crore. The sale is officially expected to be closed by the third quarter of 2010. Much of this time will be consumed in getting permissions from governments in countries where the Swedish brand has presence.

Ford is completely selling off the Volvo brand, and will not keep any of the shares with it. Ford, that bought Volvo in 1999 hasn’t been able to make much of the deal, as the Swedish brand has not made any money since 2005.
As a part of the deal, Ford will keep supplying Volvo critical components. Ford will also reportedly provide support in terms of engineering, IT and other areas before the Chinese company could manage these things all by itself. The deal also includes the use of some of Ford’s intellectual property rights by Volvo and Geely.

Commending on the development, Alan Mulally, Ford’s president and CEO said “Volvo is a great brand with an excellent product line-up. This agreement provides a solid foundation for Volvo to continue to build its business under Geely’s ownership. At the same time, the sale of Volvo will allow us to further sharpen our focus on building the Ford brand around the world.”

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Geely Chairman Li Shufu, on the occasion, said, Shufu said: “We are pleased to have reached this agreement with Ford, enabling us to safeguard and strengthen Volvo’s renowned brand heritage. This transaction will ensure Volvo’s continued leadership in the premium segment, where it enjoys a global reputation for safety and environmental-friendly technologies. As part of the proposed transaction, Zhejiang Geely Holdings will maintain the strong collaborative relationships that Volvo has built with employees, unions, suppliers, dealers and above all, customers. On completion, Volvo Cars will be a separate company with its own management team based in Gothenburg, Sweden, and a new board of directors.”

Geely has raised the loan for this deal from banks in China, USA and Europe, and loans guaranteed by the governments of Sweden and Belgium. First impressions suggest that production of Volvos will continue in Sweden and Belgium to stay closer to the supplier chain and the main market.

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