Ford talks about progress, Geely talks about tough talks ahead

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From Business Week:

Ford Motor Co. Chief Executive Officer Alan Mulally said talks to sell the automaker’s Volvo unit to Zhejiang Geely Holding Group Co. are proceeding, while the chairman of the Chinese company raised doubts about a deal.“We are making progress on the negotiations,” Mulally said today in an interview in Shanghai.

Geely Chairman Li Shufu told the Wall Street Journal that negotiations were “very tough” and “the situation is changing constantly.” Interviewed on the sidelines of a ceremony at the company’s Beijing Geely University, Li told the Journal that “if the deal fails, the problem is not on our side.”

Ford aims to sign a $2 billion accord to sell Volvo Cars to Geely by month’s end, three people familiar with the talks said last week. China Daily said yesterday that financing and technology-transfer issues may delay a sale, citing people familiar with the matter.

Mulally put Volvo on the block in late 2008 as part of his strategy to drop European luxury lines to focus on Dearborn, Michigan-based Ford’s namesake brand. He has sold the Jaguar, Land Rover and Aston Martin luxury brands since 2007.

Ford, Geely Outlook

“We are still expecting to sign an agreement within the first quarter,” John Gardiner, a Ford spokesman, said today. Ford said Dec. 23 that it expected to have a Volvo deal signed by March 31 and to complete the sale by June 30.

“Zhejiang Geely Holding remains in detailed talks with Ford as the preferred bidder for Volvo,” Geely’s London-based spokesman, Tim Burt, said today in an e-mail. “It remains confident of securing a transaction following the previously announced agreement on commercial terms for the proposed Volvo deal.”

For Geely, China’s largest private automaker based on 2008 sales, buying Volvo would provide access to the Sweden-based automaker’s technology as well as an image boost because of the brand’s status as a premium vehicle line in China, said Vivien Chan, an analyst with SinoPac Securities Asia Ltd. in Hong Kong.

“There is little chance for the deal to fall apart given that the two companies have both made a lot of efforts on the deal and have seen some progress,” Chan said.

Ford ended three years of losses in 2009 by posting $2.7 billion in net income, its first full-year profit since Mulally came from Boeing Co. in 2006. Mulally has focused on refreshing Ford’s lineup, including adding more fuel-efficient small cars, while cutting costs. He reduced the North American workforce by about 47 percent.