By Veronica Smith (AFP) – Oct 28, 2009
WASHINGTON — Ford Motor Co., the number-two US automaker, said Wednesday it had tapped Chinese peer Geely as preferred bidder for Volvo Cars, its premium Swedish nameplate.
Ford, which announced last December it wanted to sell the loss-making unit, said that it would step up negotiations with a consortium led by Zheijang Geely Group Holding, but stressed "no final decisions have been made."
The possible sale to Geely, one of the largest privately owned Chinese carmakers, comes as Ford struggles to restructure amid an ailing US auto sector that was eclipsed as the world's largest by China in January.
The Dearborn, Michigan-based group did not take government aid to cope with falling sales and avoided bankruptcy this year, unlike US rivals General Motors and Chrysler.
Ford has shed tens of thousands of jobs and closed plants in an effort to cut costs, and sold off the bulk of its luxury European brands, including Jaguar and Aston Martin.
"Any prospective sale would have to ensure that Volvo has the resources, including the capital investment, necessary to further strengthen the business and build its global franchise," said Lewis Booth, Ford chief financial officer, in a statement.
"Ford believes Geely has the potential to be a responsible future owner of Volvo and to take the business forward while preserving its core values and the independence of the Swedish brand," he added.
The Hangzhou-based Geely said that under its bid, supported by Chinese banks, Volvo's existing production and research and development facilities, union agreements and dealer networks would be maintained.
"Should a final agreement be reached, Geely will safeguard and strengthen Volvo's world-renowned brand heritage, ensuring its continued leadership as a premium car company with a global reputation for safety and environmental technologies," said Li Shufu, Geely chairman, in a separate statement.
"This is an important strategic step for Geely, signaling our commitment to Volvo's presence in more than 100 markets around the world and building on our strengths in the Chinese car industry."
Ford said it would continue to cooperate with Volvo Cars in several areas after a possible sale, but that it did not intend to retain a shareholding in the company, which it fully acquired in a 6.4 billion dollar deal in 1999.
"Ford fully understands the iconic Swedish nature of the Volvo brand and the responsibility we have as Volvo?s custodian to its employees, local communities and other key stakeholders," John Fleming, chairman of Ford of Europe and Volvo Cars, said in the statement.
John Wolkonowicz, IHS Global Insight auto analyst for North America, said that Geely's interest in acquiring Volvo would be to learn how an established automobile company conducts business "because they want to become successful across the board in Western markets."
"And the best way to learn how that's done is to purchase an existing Western company," he said in a phone interview.
"It makes very good sense for them and it makes good sense for Ford to unload it because of the very large product development expenditure that has to be put into Volvo every year," he said.
Stephen Odell, CEO of Volvo Cars, welcomed Ford's announcement as "a positive step forward" for the loss-making carmaker.
"Ford has acted as a responsible owner. Under these hard economic times we have gone through, Ford has supported us in many ways," he said at a news conference at the company's headquarters in Gothenburg, where the firm was founded in 1927.
Swedish Enterprise and Energy Minister Maud Olofsson said the news was "good, because the uncertainty has not been good for Volvo."
"And we have told Geely and everyone else that we have been in talks with that we want production to stay in Sweden," she added.
Ford shares skidded more than 5.0 percent to close at 6.96 dollars in New York amid a sharp Wall Street selloff.
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