Ford: Volvo Talks with Geely May Have Hit a Speed Bump

A couple of weeks ago, we reported that Crown -- a consortium of American investors led by former auto industry executives -- is making a play for Volvo. The group's bid for the brand is substantially lower than that of current front-runner Geely, but we pointed out that the Americans do have some advantages at the bargaining table, especially when it comes to one of Ford's biggest concerns: intellectual property. China in general, and Geely in particular, aren't known for respecting IP rights, and as negotiations move forward, we suggested that could become a sticking point.

Apparently, it has become a sticking point.

Two sources close to the discussions between Ford (F) and Geely say that things have come to a standstill, precisely because of IP concerns. Company representatives are meeting in London this week to continue the talks, but it appears as if the negotiations could soon be dead in the water -- as dead as Beijing Automotive Industry Holding Company's recent bid to buy Opel from GM, which failed due to similar problems. Geely's hand hasn't been helped by last week's arrest of Ford engineer Xiang Dong Yu, who's been charged with stealing thousands of documents from the company in his effort to land a job at Shanghai Automotive Industry Corporation; that's made Ford even more anxious about its IP, and heightened awareness of China as the source of such anxiety.

Although Ford hasn't commented officially on its discussions with Geely, company spokesman Mark Truby has indicated that Ford is still speaking to a variety of potential buyers. That sounds like good news for Crown -- or at least confirmation that the consortium is still in the running.

Of course, as losses at Volvo continue to shrink and the international auto market continues to recover, Ford may reconsider selling Volvo altogether. After all, Volvo is Ford's primary means of reaching higher-end buyers around the globe. As analyst Michael Robinet has said, "One option could be to keep Volvo right now because it is Ford’s only international near-premium brand.... Outside of North America, it’s just Ford and Volvo."

Hopefully we'll have a clearer picture of where things stand -- at least as far as Geely is concerned -- after this week's talks in the U.K.

Comments

[richjoy403:]

Employees stealing company secrets for peddling to any interested buyer is age-old. So the fact that a Chinese employee did so no more important to me than if he/she were a blond and blue eyed named Smith or Jones.

What is important is what seems to be an established trend of trade secret stealing and general lack of respect for intellectual property by the Chinese government and Chinese companies.

That is enough to give Ford pause...and perhaps enough so that they would sell Volve for less to another group...and that would be a very important indication of how such companies are regarded by western businesses.

But it seems to me the story would not end there. Ford must expand there operations in China (which is soon to replace the USA as the world's largest vehicle market). Therefore, Ford must factor in the reaction of the Chinese government, whose cooperation Ford must also have.

So the real story may not be Ford's sale of Volvo, but what Ford will do to get/keep cooperation with the Chinese government.

Oct 26 08:13 AM

[tripleblack:]

I believe that the aggressive positioning by companies like GM and Chrysler in China (whereas Ford has pointedly hung back) could work in a contrarian manner to Ford's benefit.

As GM and Chrysler lose their "American-ness", and come to be viewed by their North American customers as "global", Ford may carve out a marketing advantage just by being less cozy with Beijing.

A similar situation has developed with the mocking of GM as "Government Motors", while Ford has remained more independent thus far and is viewed as such.

Oct 26 11:01 AM

[richjoy403:]

Well tripleblack, that is an unusual contrary position...have you looked around your home to notice how many of the things you have purchased were made in China? I suppose there are a few China-phobic's who go to weird lengths to avoid made-in-China items (almost impossible now), but for the masses, it can't be done. Therefore, to do as you suggest would be hypocritical.

Furthermore, Ford absolutely needs to expand in China, or it can't be competitive in the USA.

Oct 27 07:23 AM

[Bull Run:]

With N. America auto sales projected at an annual rate of 9.5 million, I just don't see any room for GM. When auto sale were 17.5 million in the 2005-06 period GM had a customer, but not today..The 2006-06 period was GM missed opportunity to correct is balance sheet, but they decided not to, so Government Motors is just one to many car companies

Oct 27 12:04 PM