STOCKHOLM, Sweden - Ford Motor Co. said it is moving closer to selling its Swedish Volvo brand, even though the U.S. automaker is in far better financial shape than it was when it put the brand up for sale last year.
The Dearborn, Mich., automaker said Wednesday that it expects to finalize the sale of Volvo to China's Geely Group early next year if financing and government approvals fall into place.
Ford did not reveal the amount of Geely's offer. Auto analyst Matts Carlson estimated the price tag for Volvo at between US$2 billion and $2.3 billion.
Ford officially put Volvo on the market in December 2008, at the close of a year in which Ford was in desperate need of cash. Last year, the company lost $14.6 billion, the worst performance in its 106-year history. At the time, Ford had mortgaged its factories to borrow $23.5 billion, and CEO Alan Mulally joined his counterparts from Chrysler and General Motors in requesting U.S. government aid.
It turned out the company, unlike GM and Chrysler, didn't need the government aid, and it has managed to repay $10 billion in debt, reducing its total to $27 billion. Ford posted a $1-billion third-quarter profit, it stopped spending more cash than it took in, and it predicted a return to sustained profits in 2011. Ford's U.S. sales through November are down 19 per cent from the same period last year, but that's a smaller drop than the overall market's 24 per cent decline.
Ford decided to sell Volvo in order to focus its management resources on the Ford, Lincoln and Mercury brands, and that continues to be its mission, company spokesman Mark Truby said Wednesday. Ford acquired Volvo in 1999 for $6.45 billion.
"This was never really about Volvo - which we recognize is a very strong brand - but more about the direction we've decided to take with Ford," Truby said.
If the sale goes through it would be another step in the U.S. auto industry's sell-off of acquisitions made when it was flush with cash from truck and sport utility vehicle sales in the 1980s and 90s.
Ford sold its Jaguar and Land Rover brands to India's Tata Motors Ltd. in June 2008 for $1.7 billion, a third of what it paid for them. General Motors Co. is selling its rugged Hummer brand to construction machinery maker Sichuan Tengzhong Heavy Industrial Machinery Corp., and China's Beijing Automotive Industry Holdings has agreed to buy some powertrain technology from GM's Swedish Saab unit, which is being closed down unless a buyer is found by year end.
Work remains on financing and government approvals for the Volvo deal, Ford said in a statement, adding it expects to sign the pact in the first quarter of 2010 and close it in the second quarter.
Ford's Truby said the company has worked out details for sharing technology, engineering and parts with Geely, but Ford will not keep a stake in Volvo. For 10 years Ford and Volvo have shared safety and other technology. For instance, Ford's Taurus sedan is based on Volvo underpinnings.
Ford also is "comfortable" with provisions that stop Ford from having to compete with its own technology, especially in China, which has become the world's largest auto market.
"We're comfortable that we've spent enough time on those issues to ensure that they work for both sides," he said.
Ford said in a statement that the deal ensures Volvo has the resources, including the capital investment, necessary to further strengthen the business and build its global franchise.
In a separate statement, Geely said its negotiations with Ford had deepened since October and that it had also held "constructive" talks with Volvo's management and Swedish union and government officials.
"If a final purchase agreement is signed, as a world famous Swedish car brand, Volvo will continue to lead the trend of world auto technology in safety and environmental protection, and will quickly increase its unique competitive status in the Chinese market," Geely said.
Auto analyst Carlson, of the Goteborg Management Institute, said a Geely takeover would be good for Volvo.
"Volvo gets a new owner with a lot of money and which I expect will mostly leave it alone because it knows more about vehicle development, vehicle sales and vehicle distribution," said Carlson.
AP Auto Writer Tom Krisher in Detroit contributed to this report.