Formally in the works since late March, Ford's sale of the Volvo Car Corporation and related assets to the Zhejiang Geely Holding Group Company Limited was officially completed today at a signing event that took place in London. The deal is valued at $1.8 billion and consists of a $200 million note from Geely and the remainder in cash. Pending valuation "true-up" adjustments are expected to net Ford Motor Company some additional proceeds later on in the year.
Ford originally purchased Volvo in 1999 for $6.45 billion, but has struggled to make it turn a profit ever since. The Volvo sale formally ends ill-fated Ford's foray into ownership of European luxury brands. In 2007, it sold Aston Martin to a Kuwait-based private equity group for some $931 million and followed up in 2008 by selling its Jaguar/Land Rover unit to India's Tata Motors for $1.7 billion.
As part of the Geely takeover, the Chinese firm has named former Chief Executive of Volkswagen Group of America, Stefan Jacoby, to succeed Stephen Odell as president and CEO of Volvo Cars. Jacoby will assume control on August 16, while Odell will return to Ford as group vice president and chairman and CEO of Ford Europe. According to Geely, Volvo's headquarters will remain in Sweden and it will maintain a manufacturing base in Belgium as well as open new production facilities in China. Its board of directors also will have autonomy in the execution of its strategic plan.
Initial negotiations between Ford and Geely regarding the Volvo acquisition began over a year ago. While Ford will not retain any direct ownership position in the Swedish automaker, the final agreement does maintain a connection between the two firms that will ensure a smooth transition process. Ford says it will continue to supply Volvo with powertrains, stampings and other vehicle components for an undisclosed period of time as well as provide engineering support, information technology, access to tooling for common components, and other selected services during the transition interval. More critically, the deal further stipulates exactly how existing intellectual property rights between the two will be handled.
In commenting on the impact of the transaction for both parties, Alan Mulally, Ford's president and CEO, noted: "Volvo is an excellent brand with a strong product line, and it has returned to profits after a successful restructuring. We are confident Volvo has a solid future under Geely's ownership. At the same time, the sale of Volvo will allow us to sharpen our focus on the Ford brand around the world and continue to deliver on our One Ford plan serving our customers with the very best cars and trucks in the world."
Li Shufu, chairman of Geely Holding Group, was equally confident about the prospects for Volvo's success. "This is a historic day for Geely, which is extremely proud to have acquired Volvo Cars. This famous Swedish premium brand will remain true to its core values of safety, quality, environmental care and modern Scandinavian design as it strengthens the existing European and North American markets and expands its presence in China and other emerging markets."