China’s Geely Automobile Holdings Ltd is likely to submit a bid to acquire Ford’s Volvo brand in a bold attempt to expand internationally.

Geely is expected to submit a bid for the Swedish car maker as soon as next week, two people familiar with the situation said. There are at least three other possible bidders, one of which is also a Chinese company, according to one of the people.

Ford and Geely have been talking about Volvo for several weeks, the two people said. According to one of those individuals, Geely chairman Li Shufu met senior Ford executives in mid-January, around the time of the Detroit auto show, in Dearborn, Michigan Ford is based. Other representatives of the two companies have held separate talks in recent weeks, the person said.

Ford had no immediate comment, but a person close to the company acknowledged the Chinese company had been in talks with Ford for more than a year over a possible Volvo deal.

Wang Ziliang, a spokesman for Geely, declined to comment. In early February, Mr. Li, speaking through an assistant, denied a news report that his company was holding talks with Ford about buying Volvo.

Many analysts believe this could be the start of a wave of consolidation in the auto industry brought on by the economic crisis and the lowering of consumer demand due to tighter credit. In December, Fiat chief executive Sergio Marchionne predicted that only six major auto makers would survive globally.

Three European auto brands – General Motors’ Saab and Opel, and Ford’s Volvo – have effectively been put on the block in recent weeks as the U.S. auto giants try to cut costs and restructure.

A Geely bid for Volvo would be an unusual and risky move for a Chinese auto maker to take advantage of the global downturn and leap forward with its international ambitions.

Chinese companies have made a string of investments in natural resources, but so far have largely avoided buying major assets in other industries such as finance and manufacturing, despite often fire-sale prices.

Chinese auto companies have acquired foreign assets in the past – with mixed success – but never on Volvo’s scale. Last week, Chen Bin, a senior official with the National Development and Reform Commission, China’s main economic planning agency, publicly warned about the risks that acquiring a struggling foreign auto concern would pose for Chinese car makers.

“We need their technology, brands, talent and sales networks,” he said, referring to foreign car makers. But “it will be a very big challenge for Chinese companies to stabilise the operations of foreign auto makers and to maintain growth.”

If its planned bid is successful, Geely intends to maintain Volvo as an international brand, rather than turn it into a brand more focused on China, said one of the two people familiar with the matter. However, Geely might shift some of Volvo’s production to China to take advantage of China’s less-expensive labour and reap other benefits.

Geely has begun working with a U.S.-based consulting firm to put together a list of possible managers to run Volvo under Geely ownership, one of the two people said.

Last year, Volvo’s U.S. sales fell almost 32 per cent. It also saw declines in its market share in the U.S. and Europe. The Swedish brand posted a $US736 million operating loss in the fourth quarter. As part of its restructuring, Volvo trimmed one-fourth of its work force by the end of last year.

Ford earlier this year began asking companies that may want to bid for Volvo to identify themselves. The people familiar with the process said it has evolved far enough for Ford to accept offers that the company is ready to compare.

source: Wall Street Journal

See also:

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“There is a possibility for us to acquire some European auto companies with long histories,” Jin Yibo, a Chery spokesman, said by phone yesterday, confirming comments by President Yin Tongyao that were reported by China Automotive News. Jin declined to name the firms that Chery may buy. Ford Motor Co has approached Chery and other Chinese auto makers as it tries to sell its Sweden-based Volvo Car unit, according to three people familiar with the discussions.

source: CheryGlobal.com

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