Two Swedish car companies now have had their fate sealed, with ownership transferring from U.S. companies. General Motors recently sold Saab to Dutch company Spyker and today, after a long drawn out ordeal, the much anticipated Ford sale of Volvo to Chinese company Zhejiang Geely Holding Group Company Limited is vitually done after a definitive agreement was signed.
The purchase price for Volvo Cars and related assets (primarily intellectual property) is $1.8 billion (U.S.), which will be paid in the form of a note in the amount of $200 million (U.S.), and the remainder in cash. The cash portion of the purchase price will be adjusted at close for customary purchase price adjustments relating to pension deficits, debt, cash and working capital, the net effect of which could be a significant decrease in the cash proceeds to Ford. The sale is expected to close in the third quarter of 2010, and is subject to customary closing conditions, including receipt of applicable regulatory approvals.
Ford will continue to cooperate with Volvo Cars in several areas after the sale has been completed in order to ensure a smooth transition, but will not retain any ownership in the Volvo Cars business. Following completion of the sale, Ford will continue to supply Volvo Cars with, for differing periods, powertrains, stampings and other vehicle components. As part of the sale, Ford also has committed to provide engineering support, information technology, access to tooling for common components, and other selected services for a transition period to ensure a smooth separation process.
Stephen Odell, CEO of Volvo Cars, added, “The Volvo management team fully endorses Ford’s sale of Volvo Cars to Geely. We believe this is the right outcome for the business, and will provide Volvo Cars with the necessary resources, including the capital investment, to strengthen the business and to continue to move it forward in the future.