HANGZHOU, China — The bid by China's Geely Holdings Group to buy Swedish luxury-car brand Volvo from Ford is seen by many at home as a risky move, and several hurdles lie ahead, according to analysts here.
"I don't think Volvo is worth buying for Geely," said Zhang Xin, an auto analyst with Guotai Jun'an Securities. "There must be some deep-seated problems that caused Volvo to lose money and that could not be easily solved by Geely investing in it," he said.
Privately owned Geely was selected as the preferred bidder for Ford's Volvo Car last week. The U.S. and Chinese carmakers agreed to conduct more detailed discussions about the possible sale.
Geely said in a statement that Chinese banks have agreed to fund the purchase, and Volvo's major assets including its headquarters, overseas plants, engineering centers, labor contracts and dealer networks would remain unchanged after an acquisition.
Geely chairman Li Shufu has said the acquisition is a strategic move for Geely to strengthen its position in China and also to help in the continued development of Volvo.
But several analysts are questioning Geely's ability to manage Volvo, since it is still a small Chinese company with little experience in international management.
"It is also very questionable that Geely would get real valuable technologies and talents if major assets of Volvo remain outside China," said Zhang. "It will be very costly for Geely, as a huge investment is needed. Turning around Volvo is also difficult because the ailing auto brand targets a very niche market."
The financial details of the deal were not disclosed, but it is reported that Geely is likely to pay the equivalent of $2 billion for Volvo.
It could become the second major overseas acquisition by a Chinese carmaker in the current economic recession after Sichuan Tengzhong Heavy Industrial Machinery's announcement that it will buy the Hummer brand from General Motors.
Inside Line says: Many more questions than answers on the way to this deal. — Vivian Jin, Correspondent
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ford_flexer says:
03:31 PM, 09/25/2010
Volvo is a great car i used to own one. excellent quality and performance cerfified and gauranteed.
frankchen009 says:
09:30 AM, 11/08/2009
I don't think China deserves all the blame for poor product quality. If you look at products sold in the USA, whatever brand it is, many of them have good quality and are made in China. So is it really China's fault or the retailesr and importors in this country who want to maximize their profit by minimizing the price they would like to pay to buy those stuff from China. You pay for what you get. BTW, I am sure that some parts of your car are made in China. So be careful when you drive it.
gb_in_hk says:
09:58 PM, 11/06/2009
Whether or not you care for the look of Volvo cars or how they drive, the brand has been built on a well-earned reputation of safety. So now a company in China, a country whose businesses continue to show a complete disregard for product safety, wants to acquire Volvo? Wherever the actual assembly of Geely-owned Volvos takes place, in Europe or North America or Asia, considering the way Chinese products are made, I think we can assume corners will be cut, safety be damned. Do you want to trust your family's well-being to Chinese production standards? Neither do I.