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KAI RYSSDAL: Cars aren’t far behind housing on the list of industries that’re in some degree of distress. And along those lines, Ford said today it has agreed to the substantive parts of a deal to sell its Swedish brand, Volvo, to the Chinese car maker, Geely. Ford says it’s hoping to close the sale by the end of March next year.
Separately this week, another Chinese car maker, Beijing Automotive, bought some technology from a different Swedish brand owned by an American car maker. That’d be Saab, which General Motors is desperate to unload. And a couple of months ago, yet a third Chinese company agreed to buy Hummer.
From New York, Marketplace’s Alisa Roth has more on what this trend might mean for the worldwide car market.
Alisa Roth: Chinese car makers have been exporting to the developing world for a while. This will help them compete in the rest of the world.
Bruce Belzowski: They’re trying to enter the global market in a big way.
Bruce Belzowski is a researcher at the University of Michigan’s Transportation Research Institute. He says by buying Volvo, Geely can just pick up where Ford left off.
Belzowski: That would give them entree to all the world’s markets that Volvo’s in, which is probably almost all the major markets.
It also gives Geely a head-start on the technology side. Michael Robinet does global forecasting at CSM Worldwide, it’s a consulting firm. He says that’s true for any Chinese car maker that buys a Western company’s technology.
Michael Robinet: Manufacturers that purchase tooling and or capability through a Volvo or a Saab don’t have to reinvent the wheel every time they want to move into the market. What they’re going to have to do is continue to refine the wheel. And there’s a big difference.
The auto market is very competitive right now. Companies are fighting for customers in growing markets like China and stagnating ones like North America.
Belzowski, the University of Michigan researcher says companies like Geely will have to find their own niches.
Belzowski: To come into a market, you have to have something that no one else has — could be low prices, could be new technology, could be styling or a completely new segment of the market.
It may be awhile though before western car makers have to worry about competitors like Geely. Robinet, the consultant, says he thinks companies like Geely will concentrate on their very competitive home market first. And then they’ll move into places like India before trying to fight for the U.S. and Europe.
I’m Alisa Roth for Marketplace.
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