Geely Bidding for Volvo? Reportedly $293M

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Includes: F, VOLVY
by: TheCarConnection

By Richard Read

According to a (very brief) article in China Car Times, Chinese automaker Geely is finally prepared to submit a bid to Ford Motor Company (NYSE:F) for Volvo (OTCPK:VOLVY). Geely's alleged offer: $293 million. A couple of weeks ago, sources were circulating a similar rumor, but with a figure of $2 billion attached. And back in June, our own Marty Padgett noted that Ford isn't likely to accept anything less than $3 billion. Needless to say, the situation is confusing.

Adding to the confusion -- and this could merely be a glitch in translation -- China Car Times reports that the Chinese government has given Geely "penultimate" approval to purchase Volvo from Ford, meaning that there's one more step in the process before Geely receives "ultimate" approval. (Yes, we have English majors on the TCC staff. Also: big dictionaries.)

Despite the conflicting rumors, the questions of language, and the lack of transparency in Chinese government -- not to mention Ford and Geely's reluctance to discuss negotiations -- we can surmise a couple of things:

  • Geely really wants to purchase Volvo.
  • Geely has the funds to purchase Volvo.
  • The Chinese government is likely keener on Geely's purchase of Volvo than it is about the Sichuan Tengzhong Heavy Industrial Machinery Company's purchase of HUMMER. (Volvo has European cachet and a broad line of models, and it's a better match for China's zero-emissions ambitions.)
  • A significant chunk of Ford's engineering comes from Volvo, and immediate separation from that would be Very Bad News for the Blue Oval.

We've taken an informal poll of TCC staffers -- very informal -- and we think that a cash offer in the range of $300 million is doable, but it'll need to be paired with a substantial partnership agreement that keeps Ford in touch with Volvo and its precious, precious intellectual property for at least a couple of years. That way, Geely and China get a prestige mark, and Ford gets to keep its technology, realize a larger profit on the sale (cash paired with the value of partnership), and presumably a better understanding of the booming Chinese market.

But of course, there's still plenty of time for things to change.

[ChinaCarTimes via NextAutos]