Volvo and Geely to merge
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    1. #1
      Junior Member kevinG's Avatar
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      Volvo and Geely to merge

      https://www.ft.com/content/3c9e3c34-...0-43d18ec715f5

      This was probably the plan all along. I suspect they will list Volvo/Geely on a Chinese stock exchange.


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    3. #2
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      https://abcnews.go.com/Business/wire...-deal-68881777

      Looks like it will be listed on the Hong Kong stock exchange.


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    4. #3
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      Right now they are considering to merge and still have to justify it to each other. I don't want the merge to happen because experience tells me the smaller company (Volvo) tends to absorb the culture of the larger company (Geeley), so the chances of Volvo loosing their unique identity is greater. Aaaargh!
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    6. #4
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      It will be interesting to see how they are going to operate as yet another global car group across two countries on two continents far away. Geely and Volvo, which side will dominate the culture and tradition in the group, remains to be seen. The other example of such combination, Nissan and Renault alliance didn't work out very well.

      Chinese company usually is not strong in culture and mostly pragmatism. However I hope they combine the strong attention on safety, robustness and the fast moving design styling together nicely.
      Geely has revealed some beautiful car designs in past year as you can search pictures for: Geely Icon, boyue pro, xingyue, and so on.

      they are considering combining their businesses to create a company that “would accelerate financial and technological synergies between the two companies.”

      A combined company would preserve the distinct identity of each of the brands Volvo, Geely, Lynk & Co and Polestar, Volvo's electric brand.
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    7. #5
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      and then merge lotus and black cab and terrafugia maybe daimler and we can finally have my dream exige chassis with volvo safety and amg engine, wings a chauffeur for when im not interested in driving myself

    8. #6
      Junior Member Northeast's Avatar
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      From the Washington Post:

      https://www.washingtonpost.com/busin...7d4_story.html

      "Bringing the Swedish and Chinese car companies under the same umbrella makes sense at first glance. Volvo Car’s stable profits ($5.5 billion in 2019) could offset the tough terrain that Geely faces in China’s shrinking car market. "

      "Volvo has been a cash source for its parent. In 2019, Volvo paid out dividends of 2.9 billion krona ($306 million), with 2.8 billion krona of that to its parent. That was higher than the first dividends paid out in 2016. Volvo injected 1.15 billion krona into another jointly-owned Geely brand, Polestar Group, last year. Related-party transactions with the Geely sphere of companies totaled 4.1 billion krona in 2019."

      So, Geely's investment in Volvo has paid off for them, and for Volvo's customers with a revitalized lineup. But, this merger, while good for Geely, seems like it could hollow out the Volvo brand and culture. I was pleasantly surprised when my made in China S60i lived up to (and even exceeded) my expectations, and others on this forum who have vehicles imported from China don't seem to complain about quality, but I think we may have already hit peak Volvo. Of course they can do whatever they want, and they did save the company. But, it would be hard to defend Volvo's "Scandinavian" brand identity going forward.
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      Quote Originally Posted by Northeast View Post
      From the Washington Post:

      https://www.washingtonpost.com/busin...7d4_story.html

      "Bringing the Swedish and Chinese car companies under the same umbrella makes sense at first glance. Volvo Car’s stable profits ($5.5 billion in 2019) could offset the tough terrain that Geely faces in China’s shrinking car market. "

      "Volvo has been a cash source for its parent. In 2019, Volvo paid out dividends of 2.9 billion krona ($306 million), with 2.8 billion krona of that to its parent. That was higher than the first dividends paid out in 2016. Volvo injected 1.15 billion krona into another jointly-owned Geely brand, Polestar Group, last year. Related-party transactions with the Geely sphere of companies totaled 4.1 billion krona in 2019."

      So, Geely's investment in Volvo has paid off for them, and for Volvo's customers with a revitalized lineup. But, this merger, while good for Geely, seems like it could hollow out the Volvo brand and culture. I was pleasantly surprised when my made in China S60i lived up to (and even exceeded) my expectations, and others on this forum who have vehicles imported from China don't seem to complain about quality, but I think we may have already hit peak Volvo. Of course they can do whatever they want, and they did save the company. But, it would be hard to defend Volvo's "Scandinavian" brand identity going forward.
      It is like Audi and VW. I bet Volvo and Geely will use very different designs for their cars, though power train is shared to reduce the cost.
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    10. #8
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      Ironic that Volvo is now the stronger entity. Hope Li doesn't muck this up, and he does use the synergies that such a merger would bring. I know he will leave Volvo as Volvo. But if he milks Volvo too much, that won't be good.

      By Anjani Trivedi

      (Bloomberg Opinion) -- Chinese billionaire Li Shufu is bringing his cash cow in-house. Let’s hope he doesn't milk it dry.

      Volvo Car AB and Hong Kong-listed Geely Automobile Holdings Ltd. have said in a statement that they’re considering merging their businesses in a combined entity that would tap capital markets through Hong Kong and Stockholm. The parent company that they share, Zhejiang Geely Holding Group Co., is run by the ambitious Mr. Li, who seems to be taking a big first step toward consolidating his sprawling holdings.

      Other moves, such as a spinoff, had already been signaled. In a bond prospectus dated November, Geely Automobile said that Volvo and the parent intended to merge operations into a standalone business to develop “next generation combustion engines and hybrid powertrains.” Volvo Car said this would clear the way for it to focus on developing all-electric premium vehicles.Li has spent billions buying or building stakes in the likes of Mercedes Benz-maker Daimler AG, Volvo AB and Lotus Cars Ltd. through to flying-car maker Terrafugia Inc. He was recently reported to be in the running to make an investment in Aston Martin Lagonda Global Holdings Plc. Until now, he’s kept them separate but under his holding company.

      Bringing the Swedish and Chinese car companies under the same umbrella makes sense at first glance. Volvo Car’s stable profits ($5.5 billion in 2019) could offset the tough terrain that Geely faces in China’s shrinking car market. The two already collaborate through a joint venture on the Lynk & Co. brand. Since the parent bought Volvo in 2010, Geely’s cars have received an upgrade after it set up the joint China-Euro Vehicle Technology AB research and development center. There’s also a case for cost sharing. Volvo is focused on the higher- and greener-end of the car spectrum. Geely hasn’t quite gotten there. That will help as China pushes forward with its electric car ambitions.

      The pair said in their statement that the merger would “accelerate financial and technological synergies” and create a strong global group. So, let’s talk about the finances. To build up his empire, Li has piled on leverage at the Zhejiang Geely holding company level. Net debt stood at $8.1 billion at the end of September, more than double from a year prior. It needs to service that debt while feeding and funding its ambitions. S&P Global Ratings expects the company’s leverage to increase this year as volumes and margins contract.

      Volvo has been a cash source for its parent. In 2019, Volvo paid out dividends of 2.9 billion kronor ($306 million), with 2.8 billion kronor of that to its parent. That was higher than the first dividends paid out in 2016. Volvo injected 1.15 billion kronor into another jointly-owned Geely brand, Polestar Group, last year. Related-party transactions with the Geely sphere of companies totaled 4.1 billion kronor in 2019.

      Geely has held up relative to its auto-making peers, but earnings have been shrinking as sales in the world’s largest car market deteriorate. Its ability to spend and stay ahead of the technology curve are also constrained. It shelled out $423 million on capital expenditures in the 12 months to June last year, compared to Volvo’s $1.25 billion in 2019. It’s clear who will be driving once they come together.

      The parent company will keep its firm grip. Through connected transactions, it holds the licenses that Geely uses to manufacture the cars in China. Because of this structure, Geely can make and sell cars there while holding 99% stakes in operating subsidiaries, despite its offshore incorporation, according to Moody’s Investors Service Inc.

      Li needs this merger to work. With the coronavirus potentially wreaking operational havoc, the parent company has to be in financial order. A blockbuster valuation will help fund his future ambitions in a tougher global auto industry and pay down the debt he’s built up. What better way than to create an improved asset in the new entity, give it a boost with your crown jewel, Volvo, and monetize it. A more valuable asset makes for better collateral. Li will look to maximize the efficiency of his capital.

      Geely, with an enterprise value of around $16 billion, trades at 7.2 times earnings before interest, tax, depreciation and amortization. It’s sitting on cash of around $2 billion and very little debt. Volvo generated $3.2 billion of Ebitda in 2019. Assuming a multiple of 2.5 times earnings, around that of other European carmakers, would value the Swedish company at around $8 billion. The valuation of the combined entity will be higher. Even two years ago, Volvo was looking for a valuation of double that on the lower end to as much as $30 billion when talk of going public alone surfaced.

      Wherever the valuation comes out and whatever shareholders are willing to digest, let’s hope there are indeed synergies and Geely isn’t drawing too much out of Volvo Cars. That may defeat the purpose of Li’s entire exercise.


      Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal.
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    11. #9
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      Quote Originally Posted by Tostik View Post
      Ironic that Volvo is now the stronger entity. Hope Li doesn't muck this up, and he does use the synergies that such a merger would bring. I know he will leave Volvo as Volvo. But if he milks Volvo too much, that won't be good.
      Geely still sells twice many cars as Volvo globally, and almost solely in China. Volvo certainly brings a full series of engine and SPA/CMA platform. Geely can help crank more cars out of their factories, secure source of EV batteries, integrate future autonomous driving technology, and work out more beautiful designs.

      The key thing is really how to start sell Lynk&CO cars in Europe, and bring more economic cars to other countries. The potential is definitely big there.
      A merged Volvo-Geely group image certainly helps a lot.
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    12. #10
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      Li is trying to tap into the value they created with the huge investment in Volvo over the past few years.

      The proposed spin-off plan from a few years ago did not produce the valuation he hoped for so is now considering a merger to unlock that value.

      That 2.5 times valuation seems pretty low to me, just given the amount of investment that's already been made, a relatively refreshed product offering, decent sales momentum.
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    13. #11
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      Quote Originally Posted by Northeast View Post
      I think we may have already hit peak Volvo.
      Just glad my first Volvo is a US built 2019 S60 prior to the merger.

      On my credit report, the Volvo Cars Financial Services lease actually shows up as "Geely Holdings". I'm glad Geely saved Volvo, and gave them the autonomy, but those days may be over if the merger goes through. They were already talking about merging their powertrain divisions last year. https://www.media.volvocars.com/glob...ine-operations

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      Maybe they can use Volvo for the merged group name and keep Geely name mainly in China market. Then people here will feel better. But you need to allow Volvo sell eco cars. Once merged it will be a big car maker with 2000k volume.

      It is actually much better position to sell more cars in US and EU under Volvo dealership network than creating new chain stores.

      See how hard it is for Polestar to create their "Space" shop in just several big cities in US.

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      Last edited by FusionRedXC60; 02-12-2020 at 08:22 PM.
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    15. #13
      Senior Member Wayne T5's Avatar
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      I really wouldn't worry about the merger having any negative effect on Volvo. Thus far, I think you'd have to give Geely major props for the steps they've taken to date to have revived the brand. IMHO they're not going to make a decision that will hurt Volvo's brand equity - too much at stake.
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      Quote Originally Posted by FusionRedXC60 View Post
      Geely still sells twice many cars as Volvo globally, and almost solely in China. Volvo certainly brings a full series of engine and SPA/CMA platform. Geely can help crank more cars out of their factories, secure source of EV batteries, integrate future autonomous driving technology, and work out more beautiful designs.

      The key thing is really how to start sell Lynk&CO cars in Europe, and bring more economic cars to other countries. The potential is definitely big there.
      A merged Volvo-Geely group image certainly helps a lot.
      I know that Geely is twice as large, but the financials and the growth belong to Volvo. Volvo is much less leveraged, which is why Li wants to combine the books.
      Last edited by Tostik; 02-15-2020 at 09:36 PM.
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      Geely has grown faster than Volvo since 2016. Their cars are lower priced but year over year growth is much higher than 10% from Volvo. They also push out about two new models every year in multiple line-up and have three pure EV models now. And even announced L4 self driving in the new EV model Geometry C this year, 1+ year earlier than Volvo's plan.

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      Quote Originally Posted by Tostik View Post
      But when you look at the growth...

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    20. #18
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      Quote Originally Posted by FusionRedXC60 View Post
      But when you look at the growth...

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      Yeah, but who bought who?

      A little shocking at how much larger Volvo's numbers were than Geely as recently as 2015/2016. Of course Geely's growth rate is higher - just look at the market it serves.
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      Quote Originally Posted by Wayne T5 View Post
      Yeah, but who bought who?

      A little shocking at how much larger Volvo's numbers were than Geely as recently as 2015/2016. Of course Geely's growth rate is higher - just look at the market it serves.
      If you look at 2015 and maybe 2012, then the question is who needed to be saved.

      The eco car market segment in China is highly competitive with many more brands, foreign and domestic. It is not a vacuum market you can expand freely. Geely's growth of course is with great help from Volvo but it is still extraordinary.

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      Last edited by FusionRedXC60; 02-18-2020 at 10:07 AM.
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