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Ford Courts Potential Bidders For Volvo
Ford Motor has begun seeking indicative bids from potential buyers of its Swedish Volvo car brand in a sale process expected to last until late in the year.
The auction will be complicated by questions hanging over the state of the global car market and Ford's own finances.
The Chinese government's ambivalence over foreign acquisitions by its fledgling car companies, at a time when it is prodding them to consolidate at home, adds another layer of uncertainty.
Three people involved in, or briefed on, the sale say Volvo has drawn tentative interest from at least three Chinese carmakers.
Talks have also been held about forming a Swedish-led investor consortium amid concerns among some in Sweden's motor industry about the possible leakage of intellectual property to China.
Volvo's managers gave potential bidders presentations on the business last month in London. Ford is now seeking indicative bids for the loss-making brand, but in spite of reports of a mid-March date for bids, there is no firm deadline, these people say.
Potential buyers will be asked to bid on the basis of an information memorandum, but they will not be invited to tour Volvo's two plants in Sweden and Belgium. JPMorgan and Citigroup are advising Ford on the sale.
Ford is not commenting on its efforts to sell Volvo, other than to say it is reviewing its options for the brand, including a sale. It has asked potential bidders to sign confidentiality agreements.
Volvo shares engineering, purchasing, engines, and other components with Ford, so the sale will require any buyer to conclude long-term supply and other arrangements with the Detroit carmaker, as was the case with Tata Motors' $2.3bn purchase of Jaguar Land Rover last year.
Selling Volvo will take “the better part of five to six months, if not longer”, according to a banker.
Industry sources say Ford is unlikely to get anywhere near the $6.45bn it paid for Volvo in 1999, but the sale has less to do with raising cash than allowing the Detroit carmaker to focus on its core US business.
Ford, unlike GM or Chrysler, is not currently receiving federal aid, but analysts warn it might need to ask for it in the second half of 2009 if the US car market's deep downturn persists.
Chinese carmaker Geely is preparing a bid for Volvo, according to a person familiar with the company's plans, in spite of a denial last week by Li Shufu, its chairman, that he would bid for Volvo.
Rival carmakers Dongfeng and Chang'an – which produces Volvo cars in China in a joint venture with Ford – have also expressed preliminary interest in the brand, but it is unclear whether they will bid.
Chang'an declined to comment yesterday, and Dongfeng could not be reached for comment.
Chinese government officials have publicly discouraged the country's fragmented motor industry from making overseas acquisitions. China, with annual car sales of less than 6m, has about 45 carmakers, and the government is pressing them to form larger groups that can compete more effectively.
“It's a very risky purchase for the Chinese, and I doubt if we have good enough capacity to digest the purchase,” said one Shanghai-based industry consultant, who asked not to be identified.
Some Chinese carmakers might be positioning themselves as potential buyers of Volvo in order to improve their status in China as the industry consolidates, sources said.
Geely, China's second-biggest private carmaker, will seek to finance a potential buy of Volvo outside China – most likely in Hong Kong – as it did when it bought a minority stake in Manganese Bronze, the UK maker of London black cabs, in 2007.
General Motors has thus far failed to sell its Hummer brand, in spite of efforts to interest Chinese and other potential buyers.
