DealZone

Money no problem for Geely’s Volvo bid

December 1, 2009

Goldman Sachs has been known to pick a few winners in its day. The $334 million it plunked into the Chinese automaker Geely in September may prove to be one of its craftiest bets.

Geely, picked as the preferred bidder for Ford’s Volvo unit, is seeking at least $1 billion in loans from Chinese banks to finance a $1.8 billion bid, sources say.

Geely means “lucky” in Chinese. But with the bankers it has lined up, the company probably doesn’t need much in the way of luck. Bank of China, China Construction Bank and Export-Import Bank of China have agreed to extend it loans, our sources tell us. That’s about as mighty a banking syndicate as you can get in the People’s Republic.

“Money is not a problem for Geely,” said one source. “They definitely have strong support from Chinese banks, and there are a number of private equity funds queuing up to invest in Geely.”

Then there is the near-perfect timing for a Chinese automaker, looking for a technology upgrade on the cheap, to be shopping for one of the best known premium brands in the industry. Though Ford and Geely have not disclosed a possible sale price for Volvo, reports suggest it will be much closer to $2 billion than the $6.45 billion Ford paid for Volvo in 1999.

Comments
3 comments so far | RSS Comments RSS

The Chinese might have no problem with money, but they have a huge problem with perception.I am at the third Volvo, and love it. The first one was purely Sweden – meaning “luxury European import” at its best. The next two were “Ford of Sweden assembly” – not as good as genuine Sweden, but still acceptable. But Geely of Sweden assembly can’t be sold as luxury European import – at least not to me, even with Volvo badge.As soon as Volvo becomes Chinese brand, I sell mine, and never buy one again. Most Volvo customers will either upgrade to German brands, or maybe downgrade a bit to Japanese, but I can’t imagine a current Volvo owner that would tolerate an essentially Chinese car befouling their driveway.The Chinese may be good in buying on the cheap or stealing Western technology and design, but building a brand takes a lot more than that. For now “made in China” means cheap price and even cheaper quality – not nearly a match to Volvo brand.

Posted by Anonymous | Report as abusive
 

Anonymous,

What leads you to believe that Geely needs you or people like you? It seems doubtful that Geely’s business plans hinge on keeping you or people like you as customers.

As long as Geely can leverage Volvo’s designs and technology, the acquisition allows them to leapfrog into better products for the Chinese domestic market and products good enough to be sold internationally. The acquisition will be a win for Geely. Maintaining the Volvo brand is largely a non issue.

Posted by tellitlikeitis | Report as abusive
 

People like me agree that you have a good point about serving the Chinese market. Regardless of any damage Geely may or may not do to the Volvo brand, it is also entirely reasonable to expect Geely to make the most of the technological leap and ultimately offer competitive, quality cars in a global market, just as the Japanese and the South Koreans have done before them.

 

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