The Auto Writer

Ford will likely sell Volvo within the next year, having already identified China’s Zhejiang Geely Holding Group Co. (Geely) as their choice to take over the Swedish marque. Geely, for their part, is smacking their lips as they imagine what they will do with Volvo once the company has safely been paid for and transferred to their control.

Expanded Production

If reports circulating online are true, then the Volvo we know could be in for a major makeover. Geely is looking at doing two things: 1) build a plant in China to increase production; 2) raise production capacity to one million units, more than double what Volvo sells globally today.

Geely just may be able to pull it off, what with China’s car market having wrested the top spot from the United States this year as consumers flock to showrooms to eye and buy their favorite foreign makes. True, China does have its home grown variety of car manufacturers, but the Chinese consumer isn’t stupid: the best built cars bear Buick, Hyundai, and Toyota nameplates among others.

Volvo Dealings

The Chinese reports say that Geely is crafting a deal worth around $2 billion which is less than one-third the price that Ford paid for the company ten years ago. Many analysts agree that Ford overpaid when it purchased Volvo, while the depressed auto market has also held down values. In addition, few legitimate buyers have expressed interest in Volvo, likely for the reason that they have their own brands and excess capacity to contend with.

If Geely were to build a plant in China, it would have the capacity to produce as many as 300,000 units annually, with two-thirds that number staying in China. Right now, Volvo barely sells more than one thousand of its vehicles a month in China, a small slice of its current 400,000 worldwide production. Geely believes that the company’s manufacturing capacity in Europe can produce upwards of 600,000 vehicles which would continue to be sold there and in North America.

Intellectual Properties

A Volvo sale isn’t a done deal as Ford is concerned that certain intellectual property rights be preserved. Ford has tapped Volvo to help it produce a number of safety components as the Swedish brand is a leader in that area. Quite a few Ford and Volvo products share platforms with extensive exchange of key components too. Ford may be willing to sell Volvo, but there is technology that the Blue Oval wants access to for years to come.

Geely may want to work overtime to piece this deal together, because as the world economy mends, Volvo’s value will rise with it. GM recently decided to reverse course and keep Opel as it own fortunes have improved while a team of American investors known as the Crown Consortium appears to be still interested in Volvo as well.

Source: The Wall Street Journal