China govt approves Geely acquisition of Volvo
BEIJING—Geely Holding Group has received final Chinese government approval to acquire Volvo Cars from Ford Motor Co., the Commerce Ministry said Thursday.
Commerce officials approved the $1.8 billion deal Monday, said a ministry spokesman contacted by phone who refused to give his name. He said other agencies already have signed off on it.
"This was the final stage of the government approval," he said. "There are no conditions attached."
A Geely spokesman, Ning Shuyong, said the government approval paves the way for the company to complete the acquisition. Geely and Ford have said they planned to complete the deal in the third quarter.
"We will now move forward as planned," Ning said by phone from the company's headquarters in the eastern city of Hangzhou, south of Shanghai.
Geely agreed in March to buy the Swedish brand in China's biggest foreign acquisition in the auto industry. It would give one of China's small but ambitious auto makers access to a prestigious brand and top-tier technology.
European Union regulators approved the deal in early July.
Ford, which acquired Volvo in 1999 for $6.45 billion, has wanted to unload it since 2008 to raise cash and focus its efforts on its two remaining core brands: Ford and Lincoln.
It sold its Jaguar and Land Rover brands to India's Tata Motors Ltd. in June 2008 for $1.7 billion, and it sold Aston Martin to a private equity group in 2007 for $931 million. Ford also plans to stop producing its Mercury brand by the end of this year.
Beijing has been encouraging Chinese companies to expand abroad, taking advantage of the global financial crisis to acquire assets at lower prices.
Industry analysts say doubt hangs over whether 13-year-old Geely can make a success of Volvo, a perennially money-losing manufacturer on another continent.
"The uncertainty here lies on the differences of the two companies and Geely's lack of experience," said Xing Haizhi, an auto analyst for Cinda Securities in Beijing.
Ford said last week that Volvo made $53 million in the second quarter, a $290 million improvement from the second quarter of 2009. Volvo sold 191,000 cars and SUVs in the first half of this year, up 29 percent from last year.
Privately owned Geely has built a business selling cars, motorcycles and scooters with little government support.
The deal could give Geely an edge in China, which is the world's biggest auto market and one in which foreign brands often dominate. Volvo will also allow it to gain its first major foothold in Europe.
Associated Press researcher Bonnie Cao contributed to this report.
On the Net:
Chinese Ministry of Commerce (in Chinese): http://www.mofcom.gov.cn
Geely Auto: http://www.geely