Chinese car producer Geely has agreed to purchase Swedish automaker Volvo from Ford for $1.8 billion. The sum is a far cry from the $6.45 billion Ford spent to acquire Volvo in 1999.
The deal was signed on Sunday at the Gothenburg, Sweden, offices of Volvo. Because the two firms need regulatory approval in several countries, the agreement is not expected to be finalized until October.
Geely's binding deal requires them to pay $1.6 billion in cash up front, with the remaining $200 million to be paid in the future. It gives Ford the opportunity to focus on its core brand, as well as Lincoln and Mercury.
"For Ford, the completion of the sale of Volvo Cars will conclude the divestiture of our global premium brand portfolio, allowing us to concentrate further on integrating the Ford core brand globally as we continue to execute our One Ford plan," said Ford CFO Lewis Booth.
This is Ford's fourth brand sale in recent times. The company sold Aston Martin in 2007, and both Land Rover and Jaguar in 2008.
Geely will take over a brand that lost $934 million in 2009, and $1.7 billion a year earlier. The company believes they will be able to turn Volvo around by giving the luxury brand an immediate foothold in the Chinese market.
The new owners say they do not plan to move Volvo out of Sweden any time soon. Volvo employs 14,000 people in Sweden, and another 6,000 elsewhere.
“I see Volvo as a tiger. It belongs to the forest and shouldn’t be contained in the zoo,” said Geely chair Li Shufu in Mandarin. Referring to Volvo's main factories, Li said, “The heart of the tiger is in Sweden and Belgium. ... Its paws should extend all across the world.”
Volvo production is expected to hit 390,000 units in 2010, up from 330,000 in 2009.