If China-based Geely Automobile Holdings Ltd. were to purchase Volvo Car Corp. from Ford Motor Co., China’s government likely would have to provide funding for the acquisition, says Tim Dunne, director, Asia-Pacific Market Intelligence, J.D. Power and Associates.

Geely is a “small private company with limited public offering listings,” Dunne tells Ward’s. “It would be extremely ambitious.”

Calls to Ford and Geely seeking comment were not immediately returned. However, Geely issued a statement denying it was in talks with the U.S. auto maker.

Says Volvo spokesman Olle Axelson: “We have no idea of any Chinese companies being interested in Volvo Car Corp.”

The prospect of a sale originally was reported by Bloomberg.

According to Dunne, Geely’s market capitalization is about $500 million – hardly the type of company that would be able to swing the $3 billion Ford reportedly asking for the Swedish auto maker.

But Geely founder Li Shufu, 45, never has been one to back down from a challenge. He also is known as someone whose decisions fly in the face of convention, Dunne says. Shufu is “the kind of guy that does the unexpected; he’s fearless. While other people contemplate what to do, he goes and does things.”

As such, it’s possible Li could appeal to the Chinese government for assistance in purchasing Volvo. And it’s likely the government would agree to finance such a deal, Dunne says.

“Chinese banks are sitting on $1.8 trillion in foreign reserves,” he says. “In November, the government announced a $480 billion stimulus package for the economy and had a couple hundred billion earmarked to support local companies for the acquisitions of foreign companies.”

Ford, whose global operations posted a record $14.6 billion loss in 2008, ordered a strategic review of Volvo in December as it attempts to pad its cash reserves to bolster its liquidity.

Ford bought Volvo for $6.4 billion in 1999, and since then the Swedish auto maker has struggled to turn a profit. In fourth-quarter 2008, Volvo continued to track downward, with a pre-tax loss of $737 million, compared with its breakeven position year-ago.

While Volvo’s sales are on the decline, so are Geely’s. According to J.D. Power and Associates, Geely’s core brand sold 183,063 vehicles last year, a drop of 1% vs. like-2007. Including its Maple and Eagle brands, the auto maker’s 2008 sales totaled 221,762.

The majority of Geely sales were to the domestic market, with a handful of units exported to developing countries, Dunne says.

Establishing itself as a true global player, with access to Volvo’s technology and distribution network, may be the reason behind Geely’s reported interest in the Swedish auto maker, says Center for Automotive Research Chairman Dave Cole.

“(Volvo) would be a very valuable addition to them,” he tells Ward’s. “It would bring (Geely) a huge dose of technology and sales and marketing outlets all over the world. And (the possible) sale could make some sense, if …Ford could get a fair price.”

Cole agrees the Chinese government most likely would have to assist in an acquisition, as Volvo could fetch anywhere between $2 billion-$3 billion.

While Dunne agrees Geely likely is eager to gain access to Volvo’s technology and distribution network, while also instantly positioning itself as global player, he wonders whether such a deal would be a money-losing proposition.

“Outside of China, (Geely) isn’t well known at all,” Dunne says. “But while acquiring a global brand and the technology sounds attractive, Geely has to ask itself if it would make money, or at least have the potential to make money.”

Dunne also points to the number of failed automotive acquisitions in the past as an example of why Geely would do best to proceed with caution.

“Look at Ford (with former subsidiaries) Jaguar, Land Rover and Aston Martin. (Ford) couldn’t make it work,” he says, also noting Daimler-Benz AG’s experience with the former Chrysler Corp. and BMW AG’s failure to revive Rover. “The list goes on and on.”

bpope@wardsauto.com