Ford Motor Co, seeking to raise cash to avoid a federal bailout, is in preliminary talks to sell its Volvo Car unit to Geely Automobile Holdings Ltd (吉利汽車), three people familiar with the discussions said.
Ford will likely get less than the US$6.4 billion it paid for Volvo in 1999, said one of the people, who declined to be identified because the talks are ongoing.
Ford has also approached Chery Automobile Co (奇瑞汽車) and Chongqing Changan Automobile Co (重慶長安汽車), the people said.
AMBITION
Dearborn, Michigan-based Ford lost a record US$14.6 billion last year and is trying to avoid asking for government loans to survive as US auto sales plunge to the lowest level in almost 27 years.
A purchase of Ford’s last European luxury brand would help Geely founder Li Shufu (李書福), 45, meet his ambition of overseas expansion, even as the Swedish unit’s sales plummet.
“Whether it can consummate into a deal is a big question,” said Alice Chong, an analyst at CIMB-GK Securities.
“The acquisition would help Geely break into new markets and get better technology, but Geely may have to suffer short-term losses as sales in Europe and the US are collapsing,” Chong said.
Geely, a maker of US$6,000 compacts, first approached Ford about buying Volvo a year ago, before the US automaker had decided to sell its Swedish auto unit, two of the people said. Preliminary talks began in December after Ford said it would consider selling the unit.
Geely has received permission from China’s National Development and Reform Commission to study the acquisition, said the people. The government agency must sign off on any major merger and acquisition talks before a company can enter into them.
COMMITMENTS
Geely has already received commitments from Export-Import Bank of China to provide the necessary financing for the acquisition, the people said.
Sales documents will be sent to prospective buyers in the middle of this month, a person familiar with the plans said last month.
Volvo, based in Gothenburg, Sweden, has struggled as the global auto market declines and other automakers make gains in safety technology, a long-time strength for the automaker. Volvo’s US sales fell 64 percent last year. Ford said Volvo had a pretax loss of US$736 million in the fourth quarter.
Volvo, the maker of S80 sedans and C70 coupes, was once central to a failed strategy by Ford to reap a third of its profits from luxury autos. The automaker has been shedding European brands under chief executive officer Alan Mulally, recruited from Boeing Co in 2006.
Last June, Ford sold Jaguar and Land Rover to India’s Tata Motors Ltd for US$2.4 billion. It sold its Aston Martin luxury line for US$931 million in May 2007 to a group of investors.
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