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stasisLAX
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Chinese Automaker Chery To Purchase Volvo?

Tue Mar 10, 2009 12:20 am

The Chinese government has apparently given its blessing for Chery to buy Volvo from Ford Motor Company - Ford is rumored to be asking approximately $6 Billion USD for the company.

"The current global economy is making it rather difficult for Ford to unload its premium Volvo brand, but it appears as though at least one suitor is interested in the Swedish automaker. If all goes well, Volvo could exchange hands by as early as next month.

According to China’s Oriental Morning Post, the Chinese government has given permission for Chery to purchase the Volvo brand from Ford. Neither side has confirmed the report, but Chery head Yin Tongyao has stated that a Volvo acquisition has not been ruled out.

In addition to Chery, China’s Dongfeng Motor Group and Chongqing Changan are also rumored to be interested in purchasing Volvo.

Although nothing is set in stone at this point, a Chinese purchase of Volvo seems to make sense. Volvo is best known for its safety, with most Chinese domestic automakers known for their complete opposite. A Volvo purchase could go a long way in changing that reputation and would also provide a platform for U.S. sales."

Source: http://www.leftlanenews.com/chinese-...roves-chery-purchase-of-volvo.html

The Chinese market would likely get complete knockdown kits of Volvo-built products destined for Chinese-domestic sale only. Most other markets would continue to receive Swedish bulit Volvos under this rumored agreement.

The biggest benefit to the Chinese government supporting their automakers bid to buy Volvo in my opinion? Buy Volvo's excellent safety technology, then feed that technology to the whole Chinese domestic auto industry - resolving one of the biggest marketing issues with Chinese car makers - questions with how "safe" their cars really are in the minds of consumers.  yes 
"Those who would give up essential liberty to purchase temporary safety deserve neither liberty nor safety!" B.Franklin
 
bill142
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RE: Chinese Automaker Chery To Purchase Volvo?

Tue Mar 10, 2009 7:18 am

With any luck they'll leave the sweedish engineers to continue to design safer cars, and perhaps teach the chinese ones a few lessons.
 
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MillwallSean
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RE: Chinese Automaker Chery To Purchase Volvo?

Tue Mar 10, 2009 8:39 am

One of my friends is involved with this sale, working for one of the investmentbanks that has been hired. I have certain info on whats going on. I will try to say only what I deem is already out in the open and avoid to breach any confidence.

Anyway at the moment Ford and the unions have four interested parties that have been involved in discussions about Volvo Cars. Negotiations are taking place in London because Ford doesn't want to let the four prospective buyers into the plants in Ghent or HQ in Gothenburg.
Much speculation about why this is so.

Volvo Cars are desperate to get rid of certain Ford parts that they deem substandard to Volvo that they say is the reason for the demise in quality, safety and environmental standards Volvo has seen the last few years. Volvo Cars and the unions want motors to be exclusively produced in Skovde at Volvo Powertrains and not have some come from Fords plant in Wales. They want gearboxes from anywhere but the Ford factory in Britain and a few more things like this.
This will require some investments and Ford naturally doesnt want or for that sake can make these investment right now.
For this the parties have enlisted the Swedish government. They will provide financing for the investments. Right now financing for increased motorprodution in Skovde has been agreed but if I understand it correctly no agreement has been reached on any deal for gearboxes and a few other things yet.
This has to be solved before anything moves forward.
This will also impact Ford Europe and Ford plants in primarily Britain since certain factories will loose the contract to supply Volvo Cars and Ford cant have to many production units. As I have understood it unit closures will take place in Britain and this is sensitive.


Since the Volvo brand is shared between AB Volvo and the smaller Volvo cars owned by Ford, any deal Ford wants to make has to get the blessing of AB Volvo.

The contenders negotiating with Ford and the unions are four.
(And yes without the approval of the unions Ford cant sell Volvo Cars)

Dongfeng (Renault) - AB Volvos preferred partner. Nissan Diesel owned by AB Volvo owns 49% of Dongfeng trucks. Dongfeng also has a large joint venture with Nissan cars owned by AB Volvos partner Renault.
Seen as a good solution by staff at Volvo cars and Ab Volvo but the question is what Dongfeng have to gain from it. For most Volvo workers, who are keen to get under the Renault umbrella, this is a good solution.

Changan - this is the alternative Ford is most keen on since this is Ford and Mazdas Chinese partner. Ford Europes and Volvo Cars British management, who has very little respect by the all powerful Swedish unions, are pushing heavily for this partner.
The powerful unions in Gothenburg that can and will block any deal they are not happy with are yet to be convinced by this alternative though. They see Ford as the major problem for Volvo Cars and wants to get as far away as possible from the Ford sphere. They see this deal as a way for Ford to keep Volvo Cars but not pay for it and are not impressed. And remember without the Swedish unions approval there wont be any deal made.

Chery is the final Chinese player involved in the talks. Its chance might come from them being an alternative both Ford, AB Volvo and Volvos Cars unions can agree on. They are not the top alternative for either party but perhaps they can become the compromise alternative.

Now there is a fourth bidder. Its name and partners are shrugged in secrecy and few knows who is behind it. There are reports that a European carmaker is there together with investors and that they have AB Volvos blessing. However AB Volvo has denied this. Apparently this bidder has also been accepted by the powerful union leadership.
To get accepted they apparently enlisted the former CEO of Volvo and a man revered by the unions called PG Gyllenhammar.
His CV includes positions such as CEO of Aviva and the chairman of Reuters foundation among other things.
He is very well connected to Abu Dhabis royalties and speculation is that they are bankrolling a lot of this bid.

Ford is also in a situation where the Swedish government can come in and put the company under government control if they deem that Ford is destroying value. This will require quite a lot but the option exists. Bankrupcy threats like the ones GM is making for their European units is thus not possible for Ford in this situation.
The government have promised to utilise this right if Ford is seen as hindering Volvo cars progress.
So the alternative of doing nothing isnt on the table for Ford. With this said the government and the unions have so far said they are happy with Fords efforts.

Sorry for the long post, just wanted to share some information I have regarding this.
The sale was initiated by Ford in anyone doesn't know this and Ford is keen to sell since they don't have the funds to support the investments Volvo Cars needs and instead need to focus on the blue oval.
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SAS A340
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RE: Chinese Automaker Chery To Purchase Volvo?

Tue Mar 10, 2009 10:24 am

As i read it in Swedish press,volvo is going back to Sweden! Of course it's not final at this stage,but i think it will return home.  pray   yes 
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TUNisia
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RE: Chinese Automaker Chery To Purchase Volvo?

Tue Mar 10, 2009 2:04 pm



Quoting MillwallSean (Reply 2):
Volvo Cars are desperate to get rid of certain Ford parts that they deem substandard to Volvo that they say is the reason for the demise in quality, safety and environmental standards Volvo has seen the last few years.

Not to mention Ford taking credit for the inventions of Volvo engineers as if it were their own (ie RSC). There was a huge uproar over that a few years ago.
Someday the sun will shine down on me in some faraway place - Mahalia Jackson
 
Alessandro
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RE: Chinese Automaker Chery To Purchase Volvo?

Wed Mar 11, 2009 12:31 am

If the Chinese buys Volvo, they´ll close down the plants and move the machinery to PRC, no sweat. Subcontractors can dream of continue to make parts for Volvo.
Ssangyong is perfect example how things end up with Chinese ownership.
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mham001
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RE: Chinese Automaker Chery To Purchase Volvo?

Wed Mar 11, 2009 3:46 am

I was trying to understand how the Swedish unions would get along better with Chinese masters than with Ford. I don't see that happening.
 
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stasisLAX
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RE: Chinese Automaker Chery To Purchase Volvo?

Wed Mar 11, 2009 4:05 am



Quoting MillwallSean (Reply 2):
Ford is also in a situation where the Swedish government can come in and put the company under government control if they deem that Ford is destroying value. This will require quite a lot but the option exists. Bankrupcy threats like the ones GM is making for their European units is thus not possible for Ford in this situation.

This is very interesting information. Why hasn't the Swedish government moved against General Motors for destroying the value of Saab?
"Those who would give up essential liberty to purchase temporary safety deserve neither liberty nor safety!" B.Franklin
 
greaser
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RE: Chinese Automaker Chery To Purchase Volvo?

Wed Mar 11, 2009 4:21 am



Quoting StasisLAX (Reply 7):

This is very interesting information. Why hasn't the Swedish government moved against General Motors for destroying the value of Saab?

Well GM owns it, not Sweden. There's only so much you can do, GM had the leverage at the time, and were doing well. I'm pretty sure judging by what the person said who were the 3 buys (4th a secret), whoever buys it will ruin the brand, just like MG has not risen from the pits. I'm sad, but the Germans have really taken off with brand popularity, prestige, and performance. Mercedes flaunts luxury, BMW sportiness, Audi AWD sportiness, and VW affordable german engineering. Volvo sells safety. Unfortunately, It's not the only safe car choice, by far. It's a family car brand, a friendly brand, but it prices itself similar to Audi and BMW, which is a problem. Younger people dont want volvos when they can have an a4, or 3 series. I don't think Ford ruined it, it's just that Volvo's purpose, practicality and safety, are big selling points anyway, because many cars have these standard, and then some. Volvo did well in the past because car safety wasn't great in the past. Now, however, many European and American (except dodge, chrysler) brands offer as safe vehicles. If volvo wants to flourish, they need to either create a new segment where they excel or compete with the big boys on their turf.
The fundamental problem is that the Chinese manufacturers work on price - that's it. The japanese suceeded because not only did they show we were paying too much for bad cars, they could make reliable cars for less. I'll be surprised if Volvo will suffer because of it, if not for safety (due to US, EU regs), then quality.
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Kiwirob
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RE: Chinese Automaker Chery To Purchase Volvo?

Wed Mar 11, 2009 6:27 am

Option 4 looks very interesting, I've spent a while thinking about who the automaker could be, I think you can rule out all the major euro companies, none of the big boys would need investment partners, so when you think of European car makers with strong investment from the Middle East I get Aston Martin Lagonda, if Porsche can buy a major stake in VAG I can't see how Aston couldn't with the right partners buy Volvo, the reason for this would be the same as the reason for Porsches stake in VAG.
 
Kiwirob
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RE: Chinese Automaker Chery To Purchase Volvo?

Wed Mar 11, 2009 6:33 am

Option 4 looks very interesting, I've spent a while thinking about who the automaker could be, I think you can rule out all the major euro companies, none of the big boys would need investment partners, so when you think of European car makers with strong investment from the Middle East I get Aston Martin Lagonda, if Porsche can buy a major stake in VAG I can't see how Aston couldn't with the right partners buy Volvo, the reason for this would be the same as the reason for Porsches stake in VAG.
 
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MillwallSean
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RE: Chinese Automaker Chery To Purchase Volvo?

Wed Mar 11, 2009 9:01 am



Quoting Greaser (Reply 8):

Well GM owns it, not Sweden.



Quoting StasisLAX (Reply 7):
This is very interesting information. Why hasn't the Swedish government moved against General Motors for destroying the value of Saab?

As long as GM has been running the company and not been involved in asset-stripping the government cant step in even if they would want to. Remember there are strict criterias that have to be met for the government to even think of getting involved.
And having an owner that makes weird business decisions isn't a reason.
Intervention can only take place when an owner is deliberately destroying value.
Legislation is different in Europe remember and as long as Saab/Volvo is European registered brands they follow European laws. Both Saab and Volvo follow the Swedish legislation.

The problem with Saab is that they are an integrated part of GM.
Using many of GM:s products and patents.
You cant just brake Saab out of GM in the way you can brake Volvo Cars out of Ford.

If the government were to step in and take control over Saab without GM:s approval, GM can stop shipping parts. Saab would be at a stand still within days if that happened. "Just in time" production methods doesn't plan for industrial conflicts.
Saab has also seen most of its development resources taken away from the company and cant stand on its own legs at the moment.

The major issue with Chinese automakers isn't that they will move production to China. They cant and their plan is to keep the production but use the resources they can from Volvo for their own production. They also want to assemble Volvos in China, cars that will supply specific third world markets. no one have any problem with this.

The issue is that many of the key suppliers wont supply because they have expressed concerns that their industrial secrets and patents wont be honoured. Certain suppliers that are necessary for Volvo cars don't have confidence in Chinas intellectual property legislation.
There are other issues as well but the industry is so intertwined that many people need to have their say for a deal to take place.
Ford also owns certain patents and parts that Volvo Cars wants to continue using and Volvo Cars performs certain tasks for Ford that Ford cant replace overnight or purchase from an outside supplier.
There has to be deals made about this and conditions about how such parts and resources can be used.

Quoting KiwiRob (Reply 10):
Aston couldn't with the right partners buy Volvo

I have heard that Aston is for sale again. Dont know though, just pure rumours that i have heard.
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Alessandro
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RE: Chinese Automaker Chery To Purchase Volvo?

Wed Mar 11, 2009 6:40 pm



Quoting Greaser (Reply 8):
Well GM owns it, not Sweden. There's only so much you can do, GM had the leverage at the time, and were doing well. I'm pretty sure judging by what the person said who were the 3 buys (4th a secret), whoever buys it will ruin the brand, just like MG has not risen from the pits. I'm sad, but the Germans have really taken off with brand popularity, prestige, and performance. Mercedes flaunts luxury, BMW sportiness, Audi AWD sportiness, and VW affordable german engineering. Volvo sells safety. Unfortunately, It's not the only safe car choice, by far. It's a family car brand, a friendly brand, but it prices itself similar to Audi and BMW, which is a problem. Younger people dont want volvos when they can have an a4, or 3 series. I don't think Ford ruined it, it's just that Volvo's purpose, practicality and safety, are big selling points anyway, because many cars have these standard, and then some. Volvo did well in the past because car safety wasn't great in the past. Now, however, many European and American (except dodge, chrysler) brands offer as safe vehicles. If volvo wants to flourish, they need to either create a new segment where they excel or compete with the big boys on their turf.
The fundamental problem is that the Chinese manufacturers work on price - that's it. The japanese suceeded because not only did they show we were paying too much for bad cars, they could make reliable cars for less. I'll be surprised if Volvo will suffer because of it, if not for safety (due to US, EU regs), then quality.

Question is if there´s a value for SAAB or not? I doubt it. Safety is something that Renault/Nissan is master of today, not Volvo, who´s leaning towards average. The stockholders mistake was to turn down Renaults offer and later go for Ford.
German car manufacturers have their problems as well, Mercedes with the quality of the A-klasse, Audi outpriced with the A2, basically it´s only VW and Opel whom been successful in making small affordable cars among the German manufacturers.
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alfa75
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RE: Chinese Automaker Chery To Purchase Volvo?

Mon Mar 16, 2009 3:01 am

We have already started to get Volvo parts made in China so why not make the whole car there!
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Kiwirob
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RE: Chinese Automaker Chery To Purchase Volvo?

Mon Mar 16, 2009 8:59 am



Quoting Alessandro (Reply 12):
Audi outpriced with the A2

The problem with the A2 was that it was a car ahead of its time, I'm sure if it was launched today it would be a success, back in 1999 it was too advanced and the market wasn't ready for a premium supermini.
 
Alessandro
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RE: Chinese Automaker Chery To Purchase Volvo?

Mon Mar 16, 2009 11:08 pm



Quoting KiwiRob (Reply 14):
The problem with the A2 was that it was a car ahead of its time, I'm sure if it was launched today it would be a success, back in 1999 it was too advanced and the market wasn't ready for a premium supermini.

Nope, it was too expensive and would´ve been too expensive today as well, common problem when premium car manufacturer tries to make a small car for the first times.
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