Officials with Ford have reached an agreement to sell the company’s Volvo brand to China’s Geely Holding Company in an effort to streamline their business and become profitable again.
The sale marks the second time in as many months that an American automaker had agreed to hand over one of its divisions to a foreign power at a reduced price due to financial difficulties. Last month, General Motors sold its Saab brand to the Dutch supercar maker Spyker after nearly shutting down the division just weeks before the deal was signed.
As part of the agreement, Geely will pay Ford approximately $1.8 billion by the end of the third quarter, and the Detroit-based automaker will continue to build powertrains, stamping and other parts for Volvo after the sale is completed, according to Auto Week.
As for Volvo, which has become a hallmark for quality engineering and vehicle safety, Geely plans on “liberating” the Swedish brand by aggressively developing and marketing vehicles on a worldwide level.
“China, the largest car market in the world, will become Volvo’s second home market,” Geely chairman Li Shufu said in a statement. “Volvo will be uniquely positioned as a world-leading premium brand, tapping into the opportunities in the fast-growing China market.”
Shufu added that his company plans to invest at least $900 million of new capital into Volvo in the near future, and will open a new production facility in China to increase development in the East. However, Geely will not move Volvo’s main development offices nor its Swedish headquarters, and plans to keep the two companies completely separate, Reuters reports.
Meanwhile, the sale will allow Ford the financial flexibility to develop and manufacture new lines and to concentrate on the domestic market, where they have always had the most success.
Unfortunately, the agreement might spell the end for Ford Company veteran Steven Odell, who is expected to step down as the chief executive officer at Volvo soon after the sale is completed. However, many believe that Odell, who has been a major player within Ford’s organization for years, will stay on with the company after being relieved of his duties, Business Week reports.
“Odell’s been with Ford so long and is loyal to it; that’s where his heart is,” said Thomas Ivonen, a board member with Volvo. “I feel certain he will remain with Ford.”