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Posted by: Ian Rowley on October 29, 2009
Even with confirmation from Ford that China’s Geely is the preferred buyer for the U.S. automaker’s Volvo marque, there are still concerns that the long-rumored deal won’t get off the ground. Bloomberg News reports that talks may yet fail as the two companies must still resolve protection for intellectual-property rights. Bloomberg notes that Beijing Auto couldn’t work out a deal to buy Opel earlier this year due to similar concerns.
For sure, Chinese automakers are renowned, if that is the right word, for the similarities between their cars and those of foreign rivals. Indeed, one of the highlights of the Shanghai auto show in April was the Geely GE (pictured above) which is, if nothing else, a first-class Rolls Royce Phantom imitation. The Geely GE is not yet on sale and perhaps shouldn’t be taken too seriously. Still, at the time, Rolls Royce said it was considering legal action.
Analysts, meanwhile, say that even if the Volvo deal is finally sealed, success isn’t guaranteed. While backers of overseas expansion reckon that such deals can help the Chinese automakers get footholds in European and U.S. markets, access to advanced technologies, and, in the case of brands like Volvo, a chance to piggyback on their reputations for sturdiness and safety, the record of Chinese automakers doesn’t offer too much encouragement. China watchers warn that making big deals work may be even tougher for its automakers, given the challenge of bridging the large cultural and legal differences between China and elsewhere.
For all that, there were signs today that many investors like the prospect of Geely paying a possible $2 billion for Volvo. Shares in Geely Automobile Holdings, which is listed in Hong Kong, rose 4.5% at one point, reaching a record high despite the market as a whole declining.
The latest gains - Geely’s stock has quadrupled this year - followed comments from Li Shufu, the carmaker’s founder and chairman of Zhejiang Geely Holding Group, the parent of Geely Automobile Holdings. “We are delighted with the progress of our discussions with Ford,” he said in a statement on Oct. 28. “This is an important strategic step for Geely.”
BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.