Geely Agrees To Buy Volvo For $1.8B

March 29, 2010

Chinese auto manufacturer Geely announced it has reached an agreement to buy Volvo from Ford for $1.8B. Ford has been shopping Volvo around with no takers for so many years now, you’d think they had only been marketing it in the Cars and Trucks For Sale section of Craigslist.

While one might argue that the price paid was way too high for the financially-troubled Swedish brand, but it is certainly a win-win. Ford finally rids itself one of the last of the Jaques Nasser-era money-losing albatrosses, while Geely becomes the first Chinese company to pick up a real internationally-recognized auto brand — and one with a good dealership network capable of selling and providing warranty service for Geely brand cars in the near future. The fact that Volvo is synonymous with safety is also a huge value to Geely — a company based in a country known for constructing buildings without rebar and making food with dangerous chemicals.

The nearly two-billion dollar question, however, is are we looking at another DaimlerChrysler merger where instead of Chrysler quality improving, Mercedes quality (as well as reputation and financial earnings) sunk like an anchor? If the perception of Volvo’s safety or quality (neither of which are as good as actual insurance loss and JD Power reliability surveys indicate) diminishes at all, the value of the merger for Geely goes from moderate to something akin to a Disney Channel teen superstar’s abstinence pledge: nil.