China to impose duties on imported cars from U.S.

China said today it would impose anti-subsidy and anti-dumping duties on imported cars made in the United States, the latest in a series of trade spats between the world's two largest economies.

The duties, to affect the Detroit 3 and some U.S.-based foreign automakers, will begin tomorrow and last two years, the Commerce Ministry said on its Web site. Cars that have engine capacity at or above 2.5 liters will be hit with duties ranging from 2 percent to 21.5 percent.

General Motors Co. will face anti-dumping and countervailing duties ranging from 8.9 percent to 12.9 percent. Chrysler Group's will range from 6.2 percent to 8.8 percent, while the U.S. units of BMW AG and Mercedes-Benz will face duties of 2 percent and 2.7 percent, respectively.

The ministry's statement said U.S.-made cars and SUVs benefited from subsidies and had been dumped into the China market, causing "substantial damage to China's domestic industry".

U.S.-China trade tensions have been mounting in recent months, particularly in the solar industry, where tit-for-tat trade probes have underscored leaders' warnings of a rising tide of protectionism amid gloomy global economic forecasts.

Ten years after China joined the World Trade Organization, experts say it is likely to become more deeply enmeshed in trade disputes.

More problems for Beijing at the trade governing body will be partly due to its ever-expanding trade footprint, but also because many of its trading partners have growing concerns over what they see as state support for strategic industries.

The United States has filed trade 12 cases against China since it joined the WTO, five since U.S. President Barack Obama took office.

China's Commerce Minister Chen Deming said in late November the country is likely to fight back if other countries resort to trade protectionism.

GM to develop electric cars in China with SAIC, but won't share Volt

General Motors Co. says it plans to develop an electric vehicle with Chinese partner SAIC Motor Corp., and it won't be just a copy of the Chevrolet Volt.

GM and SAIC announced the project in a statement today and during various media events from Shanghai this morning.

In a teleconference today with journalists, GM Vice Chairman Steve Girsky confirmed that GM will form a 50-50 joint venture with SAIC to develop an EV for the Chinese market.

That vehicle will be designed by the Pan-Asia Technical Automotive Center (PATAC), a design studio in Shanghai run by the two partners.

The EV will be a new vehicle, not an adaptation of an existing model like the Chevy Sonic, Girsky said. But he did not indicate whether the vehicle would be a small city car, when it would be introduced or how much it will cost.

"New technology is expensive and high-risk," Girsky said. "We will utilize our partners...to lower our risk and development costs, and bring technology to the market more quickly."

As the project moves forward, GM will move ahead with its plans to import small numbers of the Chevrolet Volt into China.

No subsidy

Girsky said GM hopes to persuade the Chinese government to extend its sales subsidy to imports such as the Volt. "We are hopeful that China will consider extending incentives to all vehicles in the future," he said.

Girsky also emphasized that the Chinese government has not pressured GM to share the Volt's technology with its Chinese partners.

GM's collaboration with SAIC, which was launched in 1997, has been profitable for both companies. SAIC now is China's largest domestic automaker, and GM is China's biggest foreign automaker.

The partners produce Buicks and Chevrolets for sale in China, and they also produce a commercial microvan called the Sunshine, China's top-selling light vehicle.

GM plans to introduce 60 new and upgraded models in the country during the next five years, the company said during the Shanghai auto show in April. GM and SAIC operate ten joint ventures in the nation.

Girsky said GM is confident that it can safely share its intellectual property with SAIC. "This is not the first time that we've brought intellectual property into China," Girsky said. "We work well with this partner."

China ventures

Automakers including Daimler AG and Nissan Motor Co. have announced plans to add alternative-energy vehicles in China as the world's largest polluter seeks to reduce emissions. The government aims to have 1 million electric-powered vehicles on the road by 2015, according to the Ministry of Science.

Vehicle sales are forecast to slow this year in China, after sales-tax breaks and rebates for rural buyers ended in January and following central bank interest-rate rises.

Overall sales in the first eight months of the year rose 3.3 percent to 12 million units, with passenger-car sales gaining 6.1 percent to 9.2 million units, the China Association of Automobile Manufacturers said on Sept. 9. Deliveries climbed 32 percent last year.

The Shanghai GM joint venture introduced the Chevy Sail electric concept vehicle late last year. Vehicles developed under the partnership will be sold in China under Shanghai GM and SAIC brands, and GM also will use the architecture to build electric vehicles globally.

The agreement finalizes a nonbinding memorandum on cooperation for green-vehicle development SAIC and GM signed last November. At the time, SAIC agreed to buy a 1 percent stake in GM through an initial public offering held to make GM a public company again and cut the U.S. Treasury's stake in the company.

Ford completes sale of Volvo to China's Geely

Ford Motor Co. said today it has completed the sale of Volvo Cars to China's Zhejiang Geely Holding Group for $1.8 billion.

Divesting Volvo completes Ford CEO Alan Mulally's strategy of exiting European luxury brands to focus on the core Ford brand, following the U.S. carmaker's 2007 sale of Aston Martin, and of Jaguar and Land Rover to India's Tata Motors Ltd. in 2008.

Ford paid $6.5 billion for Volvo in 1999.

“Volvo is an excellent brand with a strong product line, and it has returned to profits after a successful restructuring. We are confident Volvo has a solid future under Geely's ownership,” Mulally said in a statement.

He added: “At the same time, the sale of Volvo will allow us to sharpen our focus on the Ford brand around the world and continue to deliver on our One Ford plan serving our customers with the very best cars and trucks in the world.”

Ford said agreements between Ford and Geely will allow both Volvo and Ford to establish "the proper use of each other's intellectual property."

The company said it will continue to cooperate with Volvo in several areas to ensure a smooth transition, but has not retained any ownership in the Volvo business. Ford will continue to supply Volvo with powertrains, stampings and other vehicle components.

The automaker will also provide engineering support, information technology, access to tooling for common components, and other selected services for a transition period.

VW's Jacoby to head Volvo

Geely said that Stefan Jacoby, CEO of Volkswagen Group of America, will be the new CEO of Volvo Cars. Stephen Odell, current Volvo CEO, is returning to Ford as chairman and CEO of Ford of Europe. Stuart Rowley, Volvo's finance head, is also returning to Ford as chief financial officer of Ford's European unit.

“Volvo is a proud company with a talented and dedicated team of employees,” Odell said in a statement. “I am especially pleased that with Ford's continued investment in recent years, Volvo is well positioned for the future with an exciting range of products that remain true to its core values – safety, quality, environmental responsibility and modern Scandinavian design.”

Jacoby said: "I am honored to join a company with the prestige and growth potential of Volvo. Our employees, suppliers, dealers - and above all our customers - can be confident that Volvo will preserve its special status as the industry leader in vehicle safety and innovation - even as it pursues new market opportunities."

Booming auto sales in China made the nation the largest auto market last year, generating profit that's allowing its manufacturers to reach out to Western markets and technologies.

Geely's plan for Volvo includes using the Swedish nameplate to produce luxury brands in China, while maintaining its operations in Europe to supply the international market.

Volvo profit challenge

Geely, which only started making cars in 1986, faces a challenge to restore Volvo to long-term profits. Volvo Cars posted revenue of $12.4 billion in 2009 by selling 334,000 cars, but it recorded a pre-tax loss of $653 million.

The last time Volvo made an annual profit was in 2005, when it posted a pretax profit of $377 million. It has been profitable the first two quarters of this year, posting a pretax profit of $53 million in the second quarter, compared with a $237 million loss in the same period a year earlier.

“Geely is not necessarily stepping into a clear-sailing situation; the challenges aren't over for Volvo,” said Rebecca Lindland, an auto analyst for IHS Automotive based in Lexington, Massachusetts. “The Chinese business culture is very different than the Swedish business culture. A lot of this will depend on how they interact.”

But, despite China's dismal record at overseas M&A, Geely may be better equipped for success due to its experience working with foreign partners, including its acquisition of Australian gearbox maker Drivetrain Systems International and its tie-up with British cab maker Manganese Bronze, IHS Automotive analyst John Zeng told Reuters.

"Geely is not a beginner in global M&A like many people think," he said. "In China, Geely has established itself as a mass market carmaker, the acquisition of Volvo provides an opportunity to bring it to the next level."

Geely Chairman Li Shufu, who got his start in refrigerator parts and motorcycles and has since been dubbed China's Henry Ford, has already been named chairman of Volvo.

Chinese cities vie for Volvo plant

Geely's plans would see its new Volvo China plant nearly double its annual global production, with an aim to sell 150,000 Volvo cars in China annually by 2015.

Volvo builds its S40 and S80L models for the Chinese market at a factory co-owned by Ford and Chongqing Changan Automobile Co. Volvo will be able to use this plant even after Geely's takeover, but a number of Chinese cities, including Beijing, Shanghai and Chengdu, are courting Geely for a new Volvo manufacturing site. No decision has been made so far.

Geely has said it is prepared to pump up to $900 million in capital into Volvo on top of the $1.8 billion it is paying Ford for the carmaker.

Volvo sold 191,832 cars in the first half, a 20 percent increase from a year earlier. In China, Volvo's fourth-biggest market, deliveries surged 88 percent to 15,497 cars in the period, helped by last year's introduction of the S80L, a longer version of the S80 that's sold only in that market.