Volvo Taken Over By The Chinese - Has China Got The Car Industry Back On Track?

   

Last weekend, manufacturer giant Ford took the decision to sell the Swedish carmaker, Volvo to the Chinese car manufacturer Zhejiang Geely Holding.  The deal, signed in Gothenburg, Sweden is worth an estimated £1.2billion making Zhejiang Geely Holding the largest private carmaker in China. 

It is the biggest signature of a Chinese company from a foreign carmaker and it only comes weeks after China overtook the USA as the top dog in the car market.  The deal was originally arranged in December, in light of the uncertainty over the growing recession and it should save 19,000 jobs worldwide at Volvo.  Largely, Volvo’s car sales have slumped massively, like many rivals since the credit crunch.  Fortunately, their situation isn’t as dire as that of Saab, which has needed rescuing to stay afloat and the well-documented problems with the Japanese figurehead, Toyota.

Ford paid £4.3billion for Volvo in 1999, and that figure shows how much the car industry has suffered in recent years, really feeling the bite of the economic issues in the world.  Zhejiang Geely Holding started looking into buying out Volvo over three years ago.  Last weekend, it was announced that Volvo would retain its Swedish backbone and it would still be run from its main headquarters base in Sweden.  Unlike Kraft’s broken promises when it bought out Cadbury’s in January, it will not move all production over to its main base in China.  The Volvo plant in Belgium will not be affected either, after fears had recently increased about job losses.  However, there are already plans for a new Volvo plant to be built in China, which will be capable of building 300,000 vehicles a year.  Geely are confident that Volvo could sell 200,000 extra cars a year in China, should they get the go-ahead to build the new plant.

Ford said it wanted to go through with the deal very quickly, so it could ‘sharpen the Ford brand across the world.’  Having disposed of the likes of Aston Martin and Jaguar since 2007, it might concern some though about Ford’s desperation to sell for a financial benefit.  During a traditional handover period, Ford will continue to supply Volvo with automotive parts and supplies.  Volvo sold 324,000 cars in 2009, which was 10% down on its 2008 figures.  However, Volvo sales have soared at the start of 2010, going up 40% in the USA in the first two months of this year.

The takeover is expected to be formerly completed in the summer.  The Chinese have recently agreed to take over parts of the failing Saab business and recently pulled out of a takeover deal of General Motors, following the failing to gain government approval in China.  This confirms the belief that China is now the country where the car-making machine is.  After months of trauma, the car industry is starting to recover, at least in some areas of Asia.  Can it recover soon enough elsewhere around the world….only time will tell.