Zhejiang Geely Holding Group Co., Ltd. (“Geely Holding Group”) today announced it has completed the acquisition of 100% of Volvo Car Corporation from Ford Motor Company.
Geely, a privately held company, also announced that Stefan Jacoby, the Chief Executive of Volkswagen Group of America, would become President and Chief Executive Officer of Volvo Cars, replacing Stephen Odell, who returns to Ford to run its European operations. The Jacoby move comes as a blow to VWoA as it is in the process of an ambitious expansion that includes a new plant in Tennessee. Both the VW group and the VW brand in North America are now being run by interim executives.
Completion of the Volvo acquisition, which follows more than a year of talks between Geely and Ford, was marked at a signing ceremony in London attended by Li Shufu, Chairman of Geely Holding Group and Lewis Booth, Chief Financial Officer at Ford.
The total purchase price for Volvo and related assets from an agreement signed in March 2010 was $1.8 billion, including a $200 million note and the balance in cash. Geely today issued the note and paid $1.3 billion in cash to complete the sale. The estimated purchase price adjustments used at closing are expected to be finalized and settled following purchase price adjustments later this year. The final accounting is expected to result in additional, unspecified, proceeds to Ford, the Dearborn- based company said in a statement. Ford has roughly $27 billion in debt on its books.
Geely issued the note and paid cash for Volvo Cars with financing from Chinese institutions and its own balance sheet as well as international capital market resources. The closing consideration reflects adjustments for pension obligations and working capital.
This formally 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 and Geely was just 13 years old. 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. In order to survive Volvo needs to roughly triple current sales. (See Ford Takes Huge Loss on Volvo Sale to Chinese)
Under Chinese ownership, Volvo Cars will retain its headquarters and manufacturing presence in Sweden and Belgium.
Ford will not retain any ownership Volvo – from 100% to zero in a little more than a decade. It will supply component parts until the now common Ford-Volvo platforms are phased out by Geely. Volvo was the last vestige of the now defunct Premier Automotive Group, which also included Aston Martin, Jaguar and Land Rover.
“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,” said Li Shufu.
Jacoby will join the board of Volvo Cars, chaired by Li Shufu. The board will comprise several new directors including Hans-Olov Olsson, a former President and Chief Executive of Volvo Cars and a former Chief Marketing Officer of Ford, who will become Vice-Chairman of the board.