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Geely buys Volvo in biggest overseas foray

Geely Chairman Li Shufu (FRONT L) shakes hands with CFO of Ford Motor Company, Lewis Booth (FRONT R) after signing a deal in Goteborg of Sweden, March 28, 2010. China\’s Zhejiang Geely Holding Group signed a deal with Ford Motor Co. here on Sunday on the takeover of Sweden\’s Volvo Cars. (Xinhua/Wu Wei)
China\’s Zhejiang Geely Holding Group signed a deal worth 1.8 billion U.S. dollars with Ford Motor Co. here Sunday to acquire the U.S. auto giant\’s Volvo car unit.
Under the definitive stock purchase deal, Geely will own 100 percent of Volvo Cars and its related assets.
The agreement was inked by Li Shufu, founder and chairman of Geely, and Lewis Booth, chief financial officer of Ford, at a ceremony at the headquarters of Volvo in Goteborg, the second largest city of Sweden.

Geely Chairman Li Shufu attends a press conference after the signing ceremony in Goteborg of Sweden, March 28, 2010. China\’s Zhejiang Geely Holding Group signed a deal with Ford Motor Co. here on Sunday on the takeover of Sweden\’s Volvo Cars. (Xinhua/Wu Wei)
The ceremony was witnessed by Li Yizhong, China\’s minister of industry and information technology, and Maud Olofsson, Swedish deputy prime minister and minister for enterprise and energy.
The agreement provides a solid foundation for Volvo to continue to build its business under Geely\’s ownership, said Booth at the ceremony.
"China, the largest car market in the world, will become Volvo\’s second home market. Volvo will be uniquely-positioned as a world-leading premium brand, tapping into the opportunities in the fast-growing China market," said Li.
Geely has secured all necessary financing to complete the transaction, he said, adding that Geely intends to preserve Volvo Cars\’existing manufacturing facilities in Sweden and Belgium, and explore opportunities to manufacture Volvo vehicles in China for the local market.
Li promised that Geely will maintain the strong collaborative relations that Volvo has built with employees, unions, suppliers, dealers and above all, customers.
Volvo Cars will eventually become a separate company with its own management team based in Goteborg and a new board of directors, he told reporters after the ceremony.
Volvo, which has about 22,000 workers around the world including 16,000 in Sweden, was purchased by Ford in 1999 for about 6.4 billion dollars.
But Ford has been attempting to sell Volvo since late 2008, due to its poor market performance. Geely was named as the preferred bidder for the Swedish subsidiary in October 2009.
Geely, which started to manufacture cars in 1998, is a major private automaker in China, with its headquarters based in southeast China\’s Zhejiang province. Geely Holding Group is the parent company of Geely Automobile Holdings.
Besides Ford, some other Western auto giants are also seeking buyers in China. Beijing Automotive Industry Holdings has agreed to buy some powertrain technology from General Motors Co.\’s Swedish Saab unit.

Maersk: Not planning JV with China Shipping
Danish shipping and oil group AP Moller-Maersk?said on Friday it has no plans to form a joint venture for transport of liquefied natural gas (LNG) with China Shipping Group, quashing media reports.

"There is nothing whatsoever about a joint venture," Paul Carsten Pedersen, head of Maersk\’s fleet of eight LNG tankers, told Reuters.
Pedersen said that the two shipping companies have a dormant agreement on cooperation in some circumstances, but declined to elaborate.
Maersk is also not involved in an order for transport of 10 billion cu m of LNG to China annually that the rumoured joint venture was supposed to handle, he said.

China Shenhua net profit up 16.6% in 2009
China Shenhua Energy Company Limited, the largest coal producer in the country, Friday said its net profit rose 16.6 percent to 30.28 billion yuan (4.43 billion U.S. dollars) in 2009 from the previous year.
Business revenue expanded 13.2 percent to 121.31 billion yuan in 2009 year on year, said the company in an annual business report filed to the Shanghai Stock Exchange.
Earnings per share was 1.522 yuan, up 16.6 percent year on year.
Shares of China Shenhua dipped 0.24 percent to 28.77 yuan Friday, before the release of its annual earnings.

Spring output boost for Sinopec\’s Maoming plant

Maintenance at China\’s second-largest refinery. [China Daily]
Following this winter\’s harsh business chill, China\’s second-largest refinery is now feeling the warmth of spring, said Xu Xiankun, president of Sinopec Maoming Petrochemical Corp\’s ethylene facility.
After a halt in operations for maintenance and repairs in January and February that resulted big losses in revenue, the Shenzhen-listed company is expecting to hit a record-high monthly production of 100,000 tons of ethylene this March, a rebound fueled by the recovery of the manufacturing industry in the Pearl River Delta, the company told China Daily over the weekend.
The plant in the coastal city of Maoming of Guangdong province had refined 50,000 tons of ethylene, a key raw material in petrochemical manufacturing, by March 16, said Xu.
Due to regular maintenance in January and equipment repair in February, the company lost production of 19,000 tons of ethylene and suffered a 150 million yuan loss in profit, Xu said.
Xu also confirmed with China Daily that its parent company Sinopec Corp has begun building a large oil storage facility in Maoming.
Fifteen new storage tanks each capable of holding 125,000 cu m of oil will hold a combined 2 million tons of crude oil by the second half of 2011, according a report in China Petrochemical News, which will double its storage in Maoming to 4 million tons.
The expanded capacity will help China weather crude oil price fluctuations and help secure the petroleum supply in Guangdong province, one of the nation\’s key manufacturing hubs.
Last year was extremely profitable for the company, Li Anxi, general manager of Sinopec Maoming Petrochemical Corp, said at the company\’s annual meeting in January.

The company produced 1.06 million tons of ethylene in 2009, generating 72.6 billion yuan in revenues and a remarkable 3.87 billion yuan in profit.
"It means we had 106 million yuan in profit every day," Li Anxi said.
It paid 17.8 billion yuan in taxes last year, accounting for 2 percent of Guangdong\’s fiscal income.
In 2006 the plant became China\’s first with an annual capacity of 1 million metric tons ethylene. Its crude oil refining capacity has reached 10 million tons a year.
It can supply more than 2.6 million tons of chemical products and 10 million tons refined products a year.
Facing southeast Asia and with south China as its back, the plant enjoys efficient imports of crude oil and exports of refined products.
The comprehensive facility includes a modern dock, crude oil loading and unloading at sea and a railway transport system.
In addition to crude oil, its pipeline serves the Pearl River Delta area with refined products.

Geely secures financing to buy Volvo: report

The parent of China\’s Geely Automobile has secured financing to buy Ford-owned Volvo cars for about 15 billion Swedish crowns ($2.10 billion), a Swedish business daily reported on Wednesday.
Dagens Industri, citing sources, said that Chinese financial institutions and regional government bodies had provided the money for Geely to complete its purchase.
The paper quoted its source as saying that the money was already "in the bank account" of parent Zhejiang Geely Holding, (ZGH) which would also have offered guarantees to Ford about the financing of its business plan for Volvo.

Earlier this week, ZGH said it had yet to sign an agreement in its ongoing bid for Volvo cars, though its plan to buy the brand for $2 billion was proceeding on track.
The company, China\’s largest privately owned carmaker, had been aiming to reach a formal deal last month and complete its purchase by May, according to a document seen by Reuters.
Geely plans to nearly double Volvo\’s annual global production with a new factory in Beijing to pull the Swedish automaker out of the red by 2011, according to a plan put together by the company.

Ningbo Port eyes Shanghai listing
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A container ship is loaded at Ningbo Port.
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Ningbo Port Co Ltd is expected to list its stock in Shanghai at the end of the second quarter of this year, the company\’s chairman said on Friday.
"We will list our shares at the end of the second quarter at the latest," Li Linghong, board chairman of the company, told China Daily on the sidelines of the ongoing National People\’s Congress session.
The company has submitted an application to the China Securities Regulatory Commission for a Shanghai listing, said Li. It will use the proceeds to build some new docks as well as undertake some mergers and acquisitions, he added, without elaborating.
Reuters reported last December that the company will raise about 10 billion yuan via a Shanghai listing, citing sources familiar with the matter.
The report said Ningbo Port\’s Shanghai IPO will fund its further acquisitions and, in the long-term, the port will continue to seek an overseas listing, very likely in Hong Kong.
Ningbo Port also plans to merge with smaller Zhoushan Port to jointly fight fast rising competition from the bigger Shanghai Port, said the report.
"Ningbo Port\’s business is well balanced. Compared with Shanghai, the busiest port in the country, Ningbo is involved more in crude oil trade while Shanghai has more advantages in the container business," said Zhang Hui, an analyst at Donghai Securities.
As the world\’s second largest oil consumer, China imported 17.11 million tons of crude in January, up 33 percent year-on-year, customs data showed.
Ningbo Port plans to invest 3 billion yuan in three new projects this year, including a deepwater dock and a crude oil dock, said Li.
The company\’s container throughput is expected to rise 5.6 percent this year from 2009. Its cargo throughput is forecast to grow 5 percent, said Li.
"It is certain that our business this year will be better than 2009 and we have already seen good signs," said Li. The company\’s business was affected by the economic downturn last year, especially in the first quarter.
In the first two months of this year, the company\’s container throughput rose 30 percent year-on-year, and cargo throughput increased 28 percent, he said.

Hummer deal fated to fail: Analysts
Since obscure Chinese heavy machinery maker Tengzhong first announced that it would buy Hummer from General Motors (GM) last year, widespread doubts about the acquisition continued to circulate.
Skeptics can now take a breather and be pleased with their foresight. The deal is finally dead after nine months of twists and turns.
GM said in a statement last week that it will begin the orderly wind-down of the money-losing Hummer operation as Sichuan Tengzhong Heavy Industrial Machines Co Ltd was unable to complete acquisition of the sports utility vehicle brand.
Tengzhong announced that it has withdrawn the bid and terminated an agreement it signed with GM in October last year after failing to win approval from Chinese regulators within the mandated timetable.
"It (the outcome) is quite normal," said Zhang Xin, an automotive analyst with Guotai Jun\’an Securities. "The whole thing should not have happened."
Zhang noted that the wrong buyer coupled with the wrong objective led to this "inevitable" failure.
"If the buyer was, for example, Geely or SAIC, the result likely could be different," said Zhang, adding that access to the auto industry in China is strictly regulated and Tengzhong – a heavy machinery maker – has no qualification to produce cars.
Unlike the flawed Hummer deal, domestic carmaker Geely\’s bid to buy Volvo from Ford has strong support from the government.
Any plan to make the gas-guzzling Hummer in China ran counter to government policies for energy-efficient, low-emission vehicles, said Marvin Zhu, a senior market analyst at JD Power Consulting (Shanghai) Co Ltd.
"If the deal was approved, it would have had an adverse public impact," he said.
Shortly after GM agreed to sell Hummer to Tengzhong, Finbarr O\’Neill, president of JD Power and Associates, voiced his concern whether a market for vehicles like the Hummer really exists in China.
"Hummer is really a niche product," he said.
At the end of last year, Beijing Automotive Industry Holding Corp (BAIC), China\’s No 5 motor group, paid $200 million to purchase some of Saab\’s assets from GM, including production lines for the Saab 9-3 and 9-5 models and Saab\’s powertrain technology.
BAIC\’s plan to use the Saab assets to develop its own brand has garnered wide praise from industry analysts.
The prerequisite for Chinese carmakers to have successful acquisitions is to figure out what they indeed need, said Yale Zhang, director of Greater China Vehicle Forecasts for CSM Worldwide Corp, a US auto industry consultancy.
There were also comments that the whole deal was a publicity ploy by Tongzheng.
Just a few days before Tengzhong\’s announcement that it withdrew its bid, media reports cited anonymous insiders saying the company was considering use of offshore investment to buy Hummer if it did not get the green light from Chinese regulators.
"To produce Hummer outside China is a viable plan but I don\’t know why they (Tengzhong) gave up," said Zhang.
He added the certainty is that Tengzhong\’s attempt to buy Hummer was not in line with the government\’s intention for green vehicles as well as further consolidation in China\’s auto industry.

China Southern gets govt cash boost

An airport ground staff member stands in front of a China Southern airplane at Taiwan Taoyuan international airport. The cash injection will help China Southern to lower its debt-to-equity ratio.[Agencies]
Shares in China Southern Airlines were suspended yesterday on the Shanghai and Hong Kong bourses after the carrier said it is yet to decide how to use the 1.5 billion yuan cash injection received from the government.
Guangzhou-based China Southern, the nation\’s largest carrier by fleet size, said the funds received from the Ministry of Finance would be routed through its parent, China Southern Air Holding Company.
The carrier and its parent are discussing the modalities of using the fund to lower its debt-to-equity ratio, which now stands at 85.73 percent, according to a regulatory filing.
The capital injection will help China Southern lower its debt-to-equity ratio by 1.62 percent to 84.11 percent, said Xie Hong, an analyst at China Jianyin Investment Securities.
The fund is the last tranche of capital that the government extended to the top three carriers as part of its efforts to help them cope with an industry slump in 2008.
The parents of the nation\’s three major carriers, China Southern, China Eastern Airlines Corp and Air China Ltd received a total of 15 billion yuan from the central government.
"It is unlikely that there will be another round of capital injection in the short term, and the worst time for airliners has passed," said Li Lei, an analyst at CITIC China Securities. The three carriers reported an aggregate net loss of 27.9 billion yuan in 2008, accounting for 48 percent of the global loss in the aviation industry.
China Southern said it expects to return to profit in 2009 after posting a 483 million yuan loss in 2008. The carrier made a net profit of 322 million yuan in the first three quarters of 2009.
Chinese carriers have benefited from the increasing air travel demand spurred by the nation\’s economic recovery. During the Spring Festival holiday this year, China Southern saw its passenger numbers rise 17 percent over the same period a year earlier, according to Yao Jun, an analyst at China Merchants Securities.
"China Southern has also been affected by the Wuhan-Guangzhou high-speed railway launched last December, which shortens the rail journey to less than three hours. The carrier saw passenger traffic between Changsha and Guangzhou decline 15 percent, despite cutting ticket prices by 5 percent," said Yao.
In late 2008, China Southern\’s parent company received a separate 3 billion yuan bailout from the government. China Eastern\’s parent has been given a total of 9 billion yuan in the past two years.
Air China, the nation\’s largest international carrier, has been granted 1.5 billion yuan, which it will use to buy out minority shareholders in a cargo unit, according to a statement filed to the Hong Kong stock exchange recently.

Chinese company confirms end of plan to buy Hummer
The potential Chinese buyer for the rugged brand Hummer of the U.S.-based General Motors announced Thursday through a press release that the deal had collapsed.
Brunswick Group told the media by e-mail about the decision by the Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd., in southwestern China\’s Sichuan province, to terminate its former plan to buy the U.S. off-road vehicle brand.
According to the email, the deal collapsed because the Sichuan company failed to acquire Chinese government approval for the deal within the time limit set by the two sides.
Zhao Tong, a senior company official with Brunswick Group told Xinhua that Tengzhong respected the result but was very regretful about failure to complete the deal.
However, the government side implied that it did not give the nod because Tengzhong did not hand in a complete purchase plan as required, which usually should include plans regarding enterprise structure, investment modes and a fund-raising program.
A spokesman with China\’s Ministry of Commerce (MOC) said Thursday that the ministry had not received any formal application from the Sichuan company regarding the Hummer deal.
The government could not yet make a decision as the enterprise did not come up with a complete purchase plan, MOC spokesman Yao Jian said at a press conference in Beijing.
The MOC had always encouraged enterprises to invest overseas, but if an enterprise could not submit a complete program within the proposed time frames, it might lead to contract failures, Yao said.
In October, Tengzhong agreed in principle to buy the brand, trademark, trade names and intellectual property license rights to build Hummer vehicles. The company also was going to assume existing dealer agreements.

Rio Tinto employees charged with bribery
Four employees of Australian mining giant Rio Tinto were charged Wednesday with bribery and infringing trade secrets, said a court statement.
The No. 1 branch of the Shanghai People\’s Procuratorate has decided to prosecute Australian citizen Stern Hu, former head of Rio Tinto\’s Shanghai office, and three local employees, Wang Yong, Ge Minqiang and Liu Caikui.
The Shanghai No. 1 Intermediate People\’s Court has accepted the case.
The statement by the court said prosecutors accused the four of "taking advantage of their position to seek profit for others, and asking for, or illegally accepting, huge amounts of money from Chinese steel enterprises."
It said they lured the Chinese enterprises\’ heads with promises, or through other illegal means, to obtain the steel companies\’ commercial secrets on multiple occasions, causing "extremely serious consequence" for the companies.
Hu was detained in July last year along with his three Chinese colleagues on suspicion of stealing state secrets. The police concluded their investigation and sent it to prosecutors on January 11.
Foreign Ministry spokeswoman Jiang Yu said on January 12 China has dealt with the case according to Chinese law and the diplomatic agreements between China and Australia.
Last week, the mining giant appointed Ian Bauert as its new China operations chief. Bauert set up the company\’s first China office more than 25 years ago and speaks fluent Chinese.
The company\’s move was seen as an effort to improve relations with its largest customer, after they cooled with the arrest of Stern Hu and Rio Tinto\’s spurning of Chinalco\’s 19.5-billion US dollar investment last year.
Headquartered in London and with offices in Melbourne, Rio Tinto is the world\’s second largest iron ore supplier, with mines located in Australia and North America.