29 March 2010

Ford Sells Volvo

China's Zhejiang Geely Holding Group will pay Ford $1.8 billion for its Volvo brand under a deal that has been negotiated since October. Ford bought the brand for $6.45 billion in 1999 and has been trying to sell it since 2008.

The privately owned Geely was ranked 11th in total sales last year in China and will benefit from Volvo's research center and reputation for high safety standards.

The Chinese company will allow Volvo to operate largely independently. Volvo will keep open its manufacturing plants in Sweden and Belgium while looking to open facilities in China.


The sale is a $4.65 billion loss for Ford over an eleven year period. But, it represents something of a victory for the sole U.S. automobile manufacturer to have escaped to need to go bankrupt or secure a government bailout. It was the first of the Big Three to seriously try to reinvent itself and has been the first to reap the rewards. Ford realizes a substantial amount for a small, unprofitable division that it vitally needs to provide that working capital that other major automakers are obtaining through government loans.

General Motors is also starting to turn around. Its reasonably strong surviving brand sales are buried for the moment in the declining sales from its discontinued brands for now. Chrysler meanwhile, is a source of considerable reorganization noise, but the results of these efforts are less obvious. The Fiat contribution is invisible in sales figures and while Chryler's minivans are selling, many of its other models are not.

This is yet another step in the process of unwinding a wave of automobile industry consolidations with each of the Big Three retaining four major divisions in the U.S. market:

Chrylser will be left with Dodge, Chrysler, Jeep and will add Fiat.

Ford will have Ford, Mercury, Lincoln, and a financing arm.

GM's North American dealers will have Chevrolet, Cadillac, GMC and Buick, with the GMC-Buick dealership channel consolidated into a single channel.

GM has four more foreign brands:

GMDaewoo (70.1%), Holden, Opel, and Vauxhall. Opel/Vauxhall's fate is currently being negotiated (Vauxhall makes right hand driver's seat versions of Opel model for the U.K. market); it may be spun off or sold [or kept]. Holden is the Australian based subsidiary of GM and also is the direct parent company of South Korean based GMDaewoo.


General Motors brands Hummer, Pontiac and Saturn will cease to be produced. Similarly, Chrysler's Dodge Viper will discontinue production this year after efforts to find a buyer for the iconic model failed. Saab, Volvo, Jaguar and Land Rover have been spun off, as have GMAC, Chrysler Motor Credit and the military division of General Motors (now a part of General Dynamic).

Fewer brands are a necessary response to selling fewer cars, and often doing so at a loss.

While big three U.S. automakers shed brands, Toyota added a low end Scion subline to its Toyota and Lexus lines, and Hyundai has made an affordable entry into the high end market with its Hyundai Genesis models. Companies from China and India meanwhile are considering plays to move into export and international markets.

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