Volvo set to follow Jaguar Land Rover?

Swedish car maker Volvo looks set to go the way of Jaguar Land Rover with parent Ford seemingly lining up the sale of the unit to a company in Asia.

China’s Geely, a partner with Coventry-based taxi-maker Manganese Bronze, appears set to buy Volvo with predictions that the sale could be complete by the Chinese New Year on February 14.

If the sale is completed then it will mean the end of Ford’s once proud Premier Automotive Group, a stable which in addition to Volvo, also included the luxury marques of Aston Martin, Jaguar and Land Rover.

Geely, based in Hangzhou, is expected to pay around £1b for the Swedish manufacturer and the deal underlines the company’s ambitions as it sets out to become one of the major players in the Chinese automotive market.

The sale would also underline the continuing shift in focus of the global automotive industry with Asian companies increasingly in the ascendency.

Although details of the deal are secret, it is believed that Ford, which originally acquired Volvo for $6.5b in 1999, will contribute to Volvo’s pension fund, which could reduce its proceeds from the sale by between $200m to $300m.

The deal will need to be approved by the Chinese government and full details of the agreement such as how long Ford will supply engines and other components to Volvo are still being hammered out.

It is thought the two companies will try and resolve any issues in time for the Chinese holiday. If everything goes to schedule then the sale could be completed by the end of June.

Ford’s chief executive Alan Mulally told press at this week’s Washington motor show that the deal was progressing well and that the sale was in the best long term interests of Ford as it could focus on its core brand.

In June 2008, the Dearborn automaker sold Jaguar and Land Rover to India’s Tata Motors for £1.15b, while a year earlier Aston Martin was disposed of to a group of investors for £480m.

The sale could come at a good time for Geely, with Ford claiming Volvo sales rose 13.8% in the United States in December.

Ford is likely to continue supplying engines and other components to Volvo for several years, while Volvo will continue to supply diesel engines to Ford in Europe.