China's Geely Automotive said its parent wants to bid for Ford's Volvo Car Corp, becoming the latest Chinese automaker to chase a foreign brand in a global industry overhaul.
The move could boost the profile of Geely, a small, home-grown car maker and, more importantly, give it access to Volvo technology it needs to upgrade its cars, analysts said, though some doubted it could manage an international brand.
Geely's privately held parent, Geely Holding Group Co, would make any bid in conjunction with a government-backed investor, CEO Gui Shengyue told Reuters by telephone.
“I believe if Volvo is for sale and Ford has a global announcement, then our parent company will participate,” Gui said. “It is interested in Volvo's sedan business and not trucks.”
Gui added that Geely's parent is waiting for Ford to decide whether to sell the Swedish car maker, but that Hong Kong-listed Geely would not participate in any bid.
Rather than merely taking a stake in Volvo, Geely's parent would seek full ownership, Gui said, adding Ford will make a decision on whether to sell Volvo within a month.
“On the assumption that the parent company successfully acquires Volvo, it will fine tune the product line and technology until Volvo becomes profitable, and then inject the assets into the listed company,” said Vivien Chan, auto analyst with Sinopac Securities Corp.
Geely, which once sold the cheapest cars in China, has been upgrading its models to tap China's increasingly affluent drivers.
“It is definitely a long-term positive for the stock, but in the short term there is no earnings impact from the news,” Chan said.
Some analysts cast doubt on the ability of privately-owned Geely to manage an international brand.
“It's a risky move even though it may help raise Geely's profile eventually,” said Ji Junfeng from Changjiang Securities.
“I'm not sure how Geely can turn around a brand like Volvo, but maybe we should not underestimate the ability of privately owned car makers. They have been growing very fast on their own with little help from the government,” he said.
Geely shares, which have trebled in the past year, rose as much as 3.9% on Thursday, buoyed by a 145% jump in first-half profit.
“The second-half results are expected to be better than the first half based on good sales figures in July and August,” Gui said.
Major Chinese automakers, including Beijing Automotive Industry Holding Corp, have attempted several overseas acquisitions in recent years with mixed results.
“Chinese automakers are not short of capacity or equipment, so an acquisition is meaningless for us if we cannot fully acquire intellectual property rights,” Xu Heyi, Chairman of Beijing Auto.
“Currently, Chinese companies are not welcome in global acquisitions partly due to political reasons, as some people discriminate against us because China is a socialist country led by the Communist Party,” he said.
Chery Automobile, Hunan Changfeng Motors Co and several other Chinese automakers have held initial talks with European or US auto brands, but refrained from making any commitments, industry executives have said.
China's largest automaker SAIC Motor group may take a passive stake in Saab Automobile by teaming up with luxury sports car maker Koenigsegg, a source with knowledge of the situation told Reuters on Tuesday.
So far, Sichuan Tengzhong Heavy Industrial Machinery, a little-known heavy machinery maker, is the only Chinese firm to have announced a significant overseas auto buy, agreeing to acquire GM's premier off-road brand, Hummer. That deal is still ongoing. (Reuters)