Volvo-Geely Fallout: It's The Money, Stupid

The deal to sell Volvo to Geely may be falling apart after 10 months of heavy petting. Everybody from Bloomberg to the DetN has lapped up the leak that it’s all about intellectual property that may be misappropriated in the Middle Kingdom. The true crime: A massive insult to the intelligence of the dear reader is being perpetrated: If there are concerns about stealing trade secrets, why did they come up now and not earlier, while Ford and Geely were progressing from first to second base in a cloud of steam? Did they fall asleep in the drive-in? Whatta we gonna tell your mama? Whatta we gonna tell your pa? “We say it’s about trade secrets.” “Great idea. Works all the time.”

The Financial Times found a more likely cause for the sudden interuptus:

Plain old money. According to the FT, “Ford has better reasons than real or imagined abuses for holding off on the sale of its one remaining international brand. The US car market may be in a wretched state, but Ford isn’t.”

According to the FT, Ford wants a better deal. Ford has gained market share in 11 of the past 12 months. Volvo’s September sales were even up 12 percent. FT’s intrepid reporters couldn’t help but note that when Ford put Volvo up for sale last December, the supposedly smart money thought Ford would die: Short-sellers held one in eight Ford shares. Now, the short interest is only one in 33 shares. Ford is way out of the desperate firesale phase.

Ford’s latest quarterly filing shows a carrying value for Volvo of about $2.4b. Geely offers $2b, resulting in a book loss of $400m. Even the FT recommends that Mulally “shouldn’t settle for less” than the book value.

As opined by yours truly, foreign car companies have shared intellectual property with Chinese for more than 20 years. In joint venture companies. Ford happily shares Volvo IP with its Chinese joint venture partner Dongfeng.

IP is a handy excuse when a deal goes sour, or when the price should go up. When GM didn’t like the Magna deal, they cried about IP going to Russia. Now, no more IP problems,the problem is Brussels.

If IP is indeed what’s holding up the Volvo sale, then IP is an acronym for Increased Price.