Volvo Chief Says Sale to Geely Could Create Opportunities in China

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North American Int’l Auto Show

DETROIT – Volvo Car Corp. CEO Stephen Odell foresees opportunities in the burgeoning China auto market should a deal be completed that would transfer ownership of the Swedish auto maker from Ford Motor Co. to Geely Automobile Holdings Ltd.

“You have to believe that if you are owned by a Chinese manufacturer that would bring a whole lot of benefits,” Odell tells Ward’s at the North American International Auto Show here.

Ford first named China-based Geely the preferred bidder for Volvo on October and in December announced “all substantive terms relating to the potential sale have been settled.”

Odell says the transaction is not a done deal, but it is poised to move forward under Geely ownership. Ford, which acquired Volvo in 1999 for $6.35 billion, has indicated the deal should be completed by the second quarter but has not revealed a transaction price.

Volvo already sells vehicles in China, and some units are produced there by Ford’s Chinese joint-venture partner Changan Ford Mazda Automobile Corp. Ltd. Volvo sold about 20,000 units in China in 2009 and this year expects that number to inch closer to 30,000.

Once under Geely ownership, Odell says Volvo should be able to substantially increase its presence in the market, predicting the auto maker could sell “a lot more than 30,000 units a year.

“The numbers I’ve seen, which are probably conservative, is (the Chinese market) will be 20 million units by 2020,” Odell says. “There will be some point where it can’t keep going on, but I can’t see it stopping at much less than 35 million.”

One aspect of China that intrigues Odell is a fondness for luxury vehicles.

Volvo CEO Stephen Odell says Chinese have fondness for luxury vehicles.

“It’s a bit like India,” he says. “I remember years ago talking about India, and everyone said, ‘There is no wealth in India.’ But (today) there are 50 million millionaires in India. That’s the population of the U.K. So you have to believe there is equal that number in China. China is very much an overt consumption market.”

While an increased presence in China is an opportunity Odell relishes, he’s also quick to point out the U.S. market still is tops on Volvo’s radar.

“Sure, fall in love with China, but don’t fall out of love with a (U.S.) market that’s potentially 17 million units when it recovers.”

Odell says Volvo is ready for the split from Ford, having received an edict from the parent company a few years ago to operate as a standalone. As such, Volvo has “been going through that process to financially and physically separate ourselves from Ford.”

But despite the head start, the process is not yet complete, and Volvo and Ford plan to maintain a close relationship post-sale.

“Even if we were to separate tomorrow, there would still be years of interrelationship, because we still have engines and common architecture,” Odell says. “We’ve been suppliers to each other for a long time.”

Volvo is working to break ties from Ford in non-automotive ways, as well. These include setting up its own political lobbying division and determining how best to offer financing to customers, having recently split from Ford Motor Credit Co.

While much remains to be determined, Odell says he is told Geely plans to keep Volvo’s manufacturing facilities in Sweden and Belgium. However, there is the possibility additional capacity could be added at a Geely facility in China.

Although some pundits argue being owned by a Chinese company will diminish the Volvo brand, Odell does not see it that way, arguing Chinese products often are falsely accused of having inferior quality.

“Some people inevitably will be concerned or jump to that incorrect conclusion,” he says. “The products we build in China today are as good as, and in some cases better, in quality. I don’t see any reason you can’t sustain the brand values.”

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