Doing Business in China

Geely China buyed Volvo for US$1.8 billion in the biggest overseas acquisition by a Chinese automaker

The price includes a $200 million note and the remainder to be paid in cash, Ford Chief Financial Officer Lewis Booth said yesterday in Gothenburg, Sweden. Time spent on seeking regulatory approval in different jurisdictions means the companies now aim to complete the deal in the third quarter, Geely Chairman Li Shufu said.

Booming sales made China the world's largest car market in 2009, generating profit that's allowing automakers to reach out to Western markets and technologies. Divesting Volvo completes Ford Chief Executive Officer Alan Mulally's strategy of exiting European luxury lines to focus on his company's namesake brand after the 2007 sale of Aston Martin, and of Jaguar and Land Rover to Tata Motors Ltd. for $2.4 billion the following year.

"If I were a competitor to Geely in China and all of a sudden I would lose ground to my competitor because they acquired Volvo, I would look to do the same," Mike Tyndall, an automotive specialist with Nomura Securities in London, said in a telephone interview. "The experience of both Tata and Geely will be the real test."

Geely Automobile Holdings Ltd., the automaker's listed unit, gained 1.5 percent to HK$4.16 in Hong Kong trading. Ford rose 12 cents to $13.98 at 8:04 a.m. before regular New York Stock Exchange composite trading, extending a surge of 39 percent this year through March 26.

Yesterday's agreement includes terms regarding intellectual property rights and supply as well as research and development, Geely said. The Chinese company will help Volvo, whose headquarters will stay in Gothenburg, tap China's growing market, Li said at a joint press conference with Ford.Geely China buyed Volvo for US$1.8 billion in the biggest overseas acquisition by a Chinese automaker