Report: Geely’s Volvo Acquisition Still Faces Hurdles

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Although both parties reported smooth sailing as of March 17, Geely’s chairman claims his company has encountered a few snags on its quest to purchase Volvo Cars from the Ford Motor Company.

According to Reuters, chairman Li Shufu told newspapers that talks had hit an impasse. Although he hasn’t specified what the problem is, he claims it isn’t Geely’s fault.

“We’re ready to seal the deal,” Shufu recently said at a ceremony in Beijing. “If the deal fails, the problem is not on our side. We have not violated any part of the agreement.”

Although an international transaction like this creates many complex issues, it appeared Ford and Geely had resolved some of the largest headaches long ago. The companies reached an agreement in November in regards to shared intellectual property rights, and seem to have reached a mutually acceptable purchase price. Anders Fogel, a Stockholm-based spokesman for the Chinese automaker, says the three remaining hurdles lie with legal documentation, financing, and regulatory and government approvals.

Prior reports suggested Geely had secured all necessary funding to complete the deal, but some parties involved are concerned the automaker needs some extra cash to actually operate Volvo. Company officials insist the firm has enough financing to overhaul the brand, but others say Geely could need as much as another $1.4 billion to finance car development, production, marketing, and distribution.

Regulatory approval could also prove to be tricky. Although Geely -- already an established automaker -- doesn’t need to ask permission to enter the automotive segment like Tengzhong did in the failed Hummer bid, it still needs to pass a number of checks and regulatory approvals tied to purchasing an foreign company.

Despite these potential challenges, Shufu expects the purchase agreement will be finalized by the end of March. If so, expect the sale to be completed in the second quarter of 2010.

Source: Reuters, Automotive News (Subscription Required)

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