Suspense that mounted for weeks culminated Sunday afternoon, a week before Easter in Göteborg, when the Ford Motor's CFO, Lewis Booth, who is overseeing Ford of Europe, formally sold Volvo to the Chinese car maker, Zhejiang Geely.

Some Swedes, still drowsy from the previous night's switch to Daylight Savings Time, lamented the loss of another national icon, but swiftly recalled that the American seller had already expatriated ownership of Volvo in 1999 for $6.45 billion.

ADVERTISEMENT
Volvo Overseas - the ultimate experience

And now, after red ink results since 2005, they unloaded it for a bargain of $1.8 billion. Notably, the $4.6 billion loss on the purchase price was not - in percentages - an altogether unfamiliar disappointment in the viewpoint of private consumers who bought their new car 11 years ago and tried to sell it today at a depreciated price. However, Ford has plunked proportionately much greater sums into maintenance, repair and upgrading of the Volvo brand than families would have put into their used jalopy.

Ford took a similarly stiff financial punch in the wallet in 2008 and lost two-thirds of the purchasing price when they sold Jaguar and Land Rover (both British brands) to India's Tata Motors for $1.7 billion. Reassuring that the US firm would aim at profitability in the future, Ford said that it would focus on its classic models of Ford, Lincoln and Mercury.

Simultaneously signed by Geely's chairman and founder, Li Shufu, and witnessed by Li Yizhong, the Chinese minister of industry and information technology, the transaction included a $200 million note. According to Booth, the remainder will be paid out in cash, and the entire deal is anticipated to be completed in the third quarter of 2010 when purchase price adjustments relating to pension deficits, debt, cash and working capital will be finalized.

"Today represents a milestone for Geely," declared Li, and he envisioned that "China, the largest car market in the world, will become Volvo's second home market." The extensive agreement also covers considerable intellectual property rights as well as supply and R&D arrangements between Volvo Cars, Geely and Ford. Independent experts in China confirmed decisions that keep Volvo's factory and business teams in Sweden.

To this, Li added, "This famous Swedish premium brand will remain true to its core values of safety, quality, environmental care and modern Scandinavian design.” Geely also promised that, "as part of the proposed transaction, they will maintain the strong collaborative relationships that Volvo has built with employees, unions, suppliers, dealers and above all, customers."

At the same time, Geely also affirmed that it intends to preserve Volvo Cars’ head offices in Göteborg and continue its existing manufacturing facilities in Sweden and Belgium. On a note of skepticism for Swedish workers, unions and taxpayers, the company statement added that it was "exploring opportunities to manufacture Volvo vehicles in new production facilities to be built in China for the local market."

Nonetheless, domestic factories might be unavoidable for the Chinese home car market, which increased on the whole by 50% last year to a sales total of 13 million passenger vehicles. Unconfirmed reports from reliable sources near to Geely's board room said that one of Geely's forthcoming moves will be to build a new plant with the capacity to build 300,000 cars in China, and Li had previously remarked that as many as 200,000 new cars will bear the Volvo trademark, which has become popular with mildly affluent Chinese motorists.

Few of the thousands of media outlets throughout the world caught glimpse of the fact that the purchase of Volvo firmly established Geely, which had previously made overtures to purchase Opel and Saab, as a major corporate contender in the European Union. Some American experts worried that Geely's beachhead in Sweden would allow the firm to come into the West with its own brand of vehicles. Swedish reporters were also concerned about China's conquest of the financial world in their Monday daily newspaper stories, but besides overall positive praise for the deal, their only reservations concerned China's lack of Western democracy and unfamiliarity with modern union dealings in the labor market.

Age comparisons contrast remarkably: founded only in 1986, Geely ought to be a struggling infant compared to Henry Ford's now century old American manufacturing monolith or Volvo, initially a subsidiary of the Swedish ball bearing manufacturer SKF, which started auto assembly lines in 1927, but first offered shares in 1935. On the other hand, since Geely's birth as a refrigerator parts supplier only 14 years ago, it has established car sales in over 100 markets, sells over 400,000 cars annually and, with 12,000 employees in China, is nonetheless only the PRC's 10th largest automobile manufacturer.

Also at the signing table was Maud Olofsson, Swedish Deputy Prime Minister and Minister for Enterprise and Energy, and Alan Mulally, Ford’s President and CEO, who said, “Volvo is a great brand with an excellent product line-up. This agreement provides a solid foundation for Volvo to continue to build its business under Geely’s ownership.”

Energetically undaunted in recent months to see the Geely deal sealed with Ford, Olofsson, also head of the Center Party, concluded: “The future road for Volvo Cars is now defined.” Last year, the European Investment Bank approved a €200 million loan ($270 million) to Volvo, but the Swedish state has balked on its loan guarantee provision until Volvo’s ownership was clarified. That now concluded, Olofsson said that Sweden's coalition administration could again consider their backing guarantee, although, according to Li, Geely had not yet decided whether they will apply for the credit.

Before closing at 4.16 Hong Kong dollars - up 1.5% in a strong market - the Hong Kong listed unit of Zhejiang Geely Holding Group rose as high as 4.9% to 4.30 Hong Kong dollars (0.55 dollars) on Monday following news of the acquisition of Volvo.