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Ford Takes Huge Loss on Volvo Sale to Chinese

Zhejiang Geely will purchase 100% of Volvo later this year.

by on Mar.28, 2010

More than a $4 billion loss, not including billions more invested in plants and products.

Ford Motor Company today confirmed it has entered into a “definitive agreement” to sell Volvo Car Corporation and related assets to Zhejiang Geely Holding Group Company Limited.

The purchase price for Volvo Cars and related assets – mostly intellectual property – is $1.8 billion, which will be paid with a note for $200 million, and the balance in cash.

Thus ends what has turned out to be for Ford shareholders a very expensive foray into the Swedish car business, which started in 1999 when Ford bought Volvo for $6 billion. Billions more were then invested in the loss making company. Volvo sold about 334,000 cars globally in 2009, 22,000 in China,  down from a record 460,000 in 1997.

Ford will not retain any ownership whatsoever in Volvo when the transaction is completed – from 100% to zero in a little more than a decade. Volvo was the last vestige of the now defunct Premier Automotive Group, which also included Aston Martin, Jaguar and Land Rover.

Ford said in a statement that the cash portion of the purchase price would be adjusted at the closing with modifications for pension deficits, debt, cash and working capital, the net effect of which “could be a significant decrease in the cash proceeds” to Ford.   (more…)