Volvo Cars & China's Geely in Talks to Merge, Creating a Single Global Auto Group
Ford the past decade, Swedish automaker Volvo Cars has been owned by Chinese automaker Geely Automobile Holdings Limited. Geely purchased Volvo from U.S. automaker Ford Motor Company in 2010. Geely's purchase of Volvo was intended to help extend the automaker's reach outside of China.
At the time, Geely founder and Chairman Li Shufu said the two automakers would continue to operate separately and that business model has been in place for the past decade. However, Geely and Volvo are now looking to combine both businesses under a single umbrella.
Volvo Car AB and Chinese automaker Geely Automobile Holdings Limited said they are considering combining their businesses to create a single global group, which would boost each company's financial position and facilitate technology sharing between the two companies. The single auto group is intended to help both Geely and Volvo better compete in the global auto industry.
However, any merger would position Geely as one of the world's top automakers. Geely sold over 2 million vehicles in 2019.
By combining their operations under a single umbrella, the two automakers would have the scale, knowledge and financial resources to be a leader in the ongoing transformation of the automotive industry, which includes electrification, connected car and autonomous driving technologies.
Geely says the combined company would have access to the global capital market through Hong Kong and with the intention to subsequently list in Stockholm as well.
"A combination of the two companies would result in a strong global group. We look forward to working with Håkan Samuelsson, president and CEO of Volvo Cars, to further investigate this opportunity with the goal to strengthen the synergies within the Group while maintaining the competitive advantage and the integrity of each individual brand," said Li Shufu, Chairman of Geely Holding Group.
A Geely dealership in Guizhou, China.
The combination would preserve the distinct identity of each of the group's brands, which includes Volvo, Geely, Lynk & Co and its luxury electric division Polestar. Geely had the same intention when it purchased Volvo.
After acquiring Volvo from Ford in 2010, Geely Chairman Li Shufu said "I want to emphasize that Volvo is Volvo and Geely is Geely. Volvo will be run by Volvo management." He added, "We are determined to preserve the distinct identity of the Volvo brand."
Ford purchased Volvo for $6.45 billion in January of 1999 in a bid to expand its own global reach, but ended up selling the company to Geely for $1.8 billion in August 2010 at a substantial loss after restructuring its business after the recession of 2008-2009.
Geely said that any transaction between the two global automakers would be carried out in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and be subject to mutually agreed terms and conditions, approval of the respective boards and shareholders of Geely and Volvo Cars, regulatory approval and prevailing market conditions.
To prepare for the move, Volvo Cars and Geely will create a joint working group to prepare a proposal to their respective boards.
Volvo Cars was founded in 1927 and has become one of the world's most well-known premium car brands. Volvo sold 705,452 vehicles in 2019 in about 100 countries. Volvo Cars employs approximately 41,500 full-time employees and is headquartered in Gothenburg, Sweden.
Geely was established in 1986 and launched its automotive brand in China in 1997 as a subsidiary of Zhejiang Geely Holding Group.
In addition to talks with Volvo, last month, Geely announced a new joint venture Smart Automobile Global Co., Ltd. with German automaker Daimer to revive the Smart brand in China. The new model will be produced in a brand new factory in China, and it is expected to be launched in 2022.
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