(By Bob Blandeburgo) By announcing China's Geely Automobile Holdings (PINK: GELYF) as the preferred bidder for its Volvo unit, Ford Motor Co. (NYSE: F) has passed another recovery milestone.
There's much left to be sorted out in any possible deal, such as
intellectual property concerns, but a completed sale of the
money-losing Volvo is just one more smudge that will be wiped clean
from Ford's balance sheet. Ford put the Swedish luxury automaker up for
sale in December last year.
"Ford believes Geely has the potential to be a responsible future
owner of Volvo and to take the business forward while preserving its
core values and the independence of the Swedish brand," said Chief
Financial Officer Lewis Booth. "But there is much work that needs to be
completed in the more substantive discussions that are agreed to take
place."
Still, without assurances that it can trust its intellectual
property in the hands of a Chinese company, Ford could walk away from a
Geely deal. Technology found in Volvos will be used in future Ford
products.
Earlier this month, the Federal Bureau of Investigation (FBI)
arrested former Ford engineer Xiang Dong Yu, and charged him with the
theft of more than 4,000 documents from Ford as he tried to get a job
with Shanghai Automotive Industry Corp., Bloomberg News reported, citing a U.S. indictment. The 10-year Ford veteran was hired by Beijing Auto.
"Volvo is completely integrated into Ford's product development strategy, and Ford should be concerned about where its vehicle architectures will end up," Michael Robinet, a CSM Worldwide analyst told Bloomberg. "This is akin to selling a room on your house. You can't separate it easily."
Putting Volvo on the market is just one of several steps the
Dearborn, Mich. automaker has taken to right itself after losing record
amounts of money in the past few years. Since 2006, it cleaned out its
upper management, sold its Jaguar Land Rover line and took out
an $18 billion loan in 2006 that helped it refuse federal bailout money last year.
Now, it appears Ford is on the brink of the black.
"I think we are beginning to kind of see the fruits of the
longer-term efforts," Barclays Capital analyst Brian Johnson told the Detroit Free Press.
