Skepticism Voiced On Chery's Volvo Ambitions

[alin89 9]

China's Chery Automobile is reportedly studying the possibility of acquiring Volvo from Ford Motor, in a deal estimated to be worth more than $4.4 billion. Despite the Chinese automaker's ambitions, it may well find that its resources cannot accommodate such a takeover.

Chery, which at 11 years old is the youngest and the most aggressive of China's carmakers, is undertaking a feasibility study on acquiring Volvo, according the Chinese business magazine Caijing. Its plans are still at a preliminary stage, and management has yet to submit a proposal to the relevant authorities.

Chery, which is owned by the city of Wuhu in Anhui province, is seeking funding from local banks and private equity firms to back a bid of more than 30 billion yuan ($4.4 billion), Caijing reported on Sunday, citing unnamed market sources.

Chery would need to rely heavily on outside financing since the company has been stymied in its plans to tap the equity markets for funds. Chery initially planned to float shares in Shanghai and Hong Kong simultaneously in the second half of this year. However, its capital structure failed to meet the requirements of the Hong Kong Stock Exchange, and the 50% plunge of the Shanghai market over the past eight months has led Chery to postpone an A-shares listing until next year.

Ford Motor (China) refused to comment on the news Monday, leaving its U.S. headquarters to give an official response later the day. Meanwhile, Chery's spokesperson could not be contacted to confirm the report.

Zhang Xin, an auto analyst with Guotai Jun'an Securities in Shanghai, commented that Chery was unlikely to take over the Sweden-based carmaking company, part of Ford's Premier Automotive Group, for a consideration equivalent to Chery's total asset value. “How would it possible for Chery to purchase Volvo at 30 billion yuan given Chery’s total assets, including debt, are worth slightly less than that amount? I don’t see a reason why Chery has to spend that much to buy Volvo given Volvo’s brand value would be depreciated under new ownership,†he told Forbes.com over the phone.

Zhang regarded it as unlikely that Ford Motor (nyse: F - news - people ) would sell Volvo to Chery because Ford Motor (China) has set up a joint venture--the Chang'an Ford Automobile Co. --with Chang’an Motors in Chongqing to produce the Volvo S40 family sedan in China. LOLZ

"Besides, Chery has already clinched a … contract to produce vehicles for Chrysler Group for the U.S. market, so what’s the synergy for Chery to buy another foreign brand?" Zhang added. (See "Chrysler Inks Deal To Sell Chinese-Made Cars")

Ford has repeatedly denied that it intends to put Volvo on the block, but with oil prices rising and the fall in popularity of gas-guzzling SUVs and pickup trucks hammering the American auto industry, divesting the Swedish carmaker would give it more cash for its turnaround program. (See "Ford Focuses On Smaller Cars")

Ford bought Volvo Group's car unit for $6.45 billion in 1998, in the process of building up a portfolio of premium European car brands that at its fullest included Jaguar, Land Rover and Aston Martin. Volvo is the only one remaining after Ford sold off the other three in the past year and a half.

The No. 2 U.S. automaker has said it wants to hold onto Volvo, which is more deeply integrated into Ford operations than the three U.K. luxury brands were, but there are rumors that CEO Alan Mulally would like to shed the unit, and major shareholder Kirk Kerkorian has called for it to be put up for sale.

Volvo is hurting, having posted a loss of $151 million for the first quarter. Amid a deteriorating cost environment for all automakers, Volvo is worse off than others, given its dependence on its market in the United States and its lack of manufacturing facilities there--exporting cars across the Atlantic has become an increasingly expensive proposition. In late June, it announced plans to cut 2,000 jobs worldwide, about 8% of its 25,000 workers, and to reduce the production of its V70 and S80 passenger cars and XC70 and XC90 sport utility vehicles.

Rumors have been circulating since last month that the ailing American auto giant would hive off the respected Swedish car brand to a Chinese carmaker in order to raise cash for its turnaround efforts. The Swedish newspaper Dagens Industri reported that Ford was in negotiations with an unnamed Chinese automaker. Shanghai Automotive Industry Corp., China's largest carmaker, is said to be interested in acquiring another European brand to go along with the failed MG Rover Group of the U.K.

[Roberto 410]

NOOO WAYY, atat am de zis, sper sa nu fiu dezamagit, desi nu cred ca se va intampla asa ceva, ar fi prea de tot, este ceva strigator la cer, brand-ul care reprezinta siguranta sa fie luata de un producator de sicrie din aluminiu.

http://www.youtube.com/watch?v=4Swzbt76wBM

[zippy 15]

Cred ca e cazul ca noi cu astea mai vechiute sa ne cumparam repejor altele noi,acum cat inca mai sunt masini... \