Thu, December 24, 2009
Business > Industries > Volvo sale to China's Geely

China's Geely agrees Volvo buy, BAIC eyes expansion

2009-12-23 14:16:33 GMT2009-12-23 22:16:33 (Beijing Time)

A worker cleans a Volvo at the 2009 New York International Auto Show April 9, 2009.(Photo/Reuters)

BEIJING/STOCKHOLM – China's automakers Geely and BAIC pushed ahead with plans to harness the technology of Ford's (F.N) and General Motors' (GM.UL) ailing Swedish brands Volvo and Saab in a bid to be global industry players.

U.S. Ford Motor said in a statement on Wednesday it had agreed all substantial commercial terms in a deal to sell its Volvo Car Corporation unit to China's Zhejiang Geely Holding Group, parent of Geely Auto (0175.HK).

"While some work still remains to be completed before signing ... Ford and Geely anticipate that a definitive sale agreement will be signed in the first quarter of 2010," Ford said, adding the deal was seen closed in the second quarter.

The estimated $1.8 billion deal would be the largest overseas acquisition by a Chinese automaker. It follows the recent purchase by Beijing Automotive Industry Holding Co of assets from General Motors' Swedish unit Saab.

Chinese carmakers are taking advantage of a crisis-sparked shake-up of the auto industry, tapping into Western brands while taking advantage of a fast-growing home market, which is seen passing the United States this year.

However, there is still a significant technology gap between domestic Chinese automakers and their global rivals, which has left the Chinese looking for acquisitions of overseas technology and designs as the global auto industry restructures.


Beijing Automotive Industry Holding Corp (BAIC), China's fifth-largest automaker, said separately it would launch an aggressive campaign to develop its brand both at home and overseas, after buying the rights to old Saab models from GM.

Saab Automobile itself faces closure unless a last-gasp offer by Dutch-listed luxury car maker Spyker Cars (SPYKR.AS) is accepted by GM, which said last week it would begin winding down the brand after failing to find a suitable buyer.

BAIC said it will invest 33 billion yuan ($4.8 billion) in vehicle R&D over three years, after paying $200 million for the Saab technology, including the rights to three overall vehicle platforms and two engine technologies.

"Someone has commented that the purchase of Saab's intellectual property can help cut short the development time for Beijing Auto's own-brand passenger vehicles by 4-5 years," BAIC Chairman Xu Heyi told reporters on Wednesday.

"We basically agree with the view."


The Chinese car maker plans to immediately start integrating Saab technology into its vehicles with an aim to sell 100,000 self-developed passenger vehicles in 2011, Xu said.

The sales target is a bit aggressive, said Tan Kunyuan, an analyst at Changjiang Securities.

"It will take at least a year for the market to recognize the brand and BAIC probably would need to modify the appearance of Saab cars to fit with Chinese market demand."

The Beijing-based automaker is in production partnership with Daimler (DAIGn.DE) and Hyundai Motor (005380.KS), with most of their joint output for sale in the domestic market. Xu said BAIC sold 1.24 million vehicles in 2009.

BAIC's Saab acquisition includes the intellectual property for Saab's 9-5 and 9-3 sedans and some equipment to make them, leaving the fate of the Swedish-based automaker up in the air.

Spyker Cars is still in talks to buy Saab from GM despite BAIC's development plans, a Spyker spokesman said separately, adding it was positive that Sweden's metal workers' union backed Spyker's bid for Saab.


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