Ford Motor Co. agreed to sell Volvo Cars to Zhejiang Geely Holding Co. for $1.8 billion in the biggest overseas acquisition by a Chinese automaker, capping sales talks that began more than 18 months ago, Bloomberg reported.
The price includes a $200 million note and the remainder to be paid in cash, Ford Chief Financial Officer Lewis Booth said yesterday in Gothenburg, Sweden. The companies expect to finish the deal in the third quarter after getting regulators’ approval, Geely Chairman Li Shufu said.
Divesting Volvo completes Chief Executive Officer Alan Mulally’s strategy of exiting European luxury lines to focus on Ford’s namesake brand after the 2007 sale of Aston Martin, and of Jaguar and Land Rover to Tata Motors Ltd. for $2.4 billion the following year. Booming sales made China the world’s largest car market in 2009, generating profit that’s allowing automakers to reach out to Western markets and technologies.
Ford fell 19 cents, or 1.4 percent, to $13.67 at 9:35 a.m. in New York Stock Exchange composite trading, after the automaker said today that a United Auto Workers trust would sell 362.4 million warrants. Each represents the right to purchase one share of Ford common stock at an exercise price of $9.20.
Geely Automobile Holdings Ltd., the automaker’s listed unit, gained 1.5 percent to HK$4.16 in Hong Kong trading.
Yesterday’s agreement includes terms regarding intellectual property rights and supply as well as research and development, Geely said. The Chinese company will help Volvo, whose headquarters will stay in Gothenburg, tap China’s growing market, Li said at a joint press conference with Ford.
Volvo plans to produce 390,000 cars this year, compared with 330,000 in 2009, CEO Stephen Odell said. Geely will restore profitability to Volvo, according to Ford’s Booth.
Ford will continue to supply Volvo powertrains, stampings and some 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.
