On Wednesday, when Ford Motor Co. (NYSE:F)
named a group led by Chinese automaker Zhejiang Geely
Holding Group Co. Ltd. as the preferred bidder for its Volvo Car Corp.
division, there remained a big hurdle for any deal to overcome: how to safeguard Ford's intellectual property rights. The Deal Pipeline subscribers will find details
here.
Striking an unusual note -- some might say a condescending one -- for a corporate auction, Ford CFO Lewis Booth said that
"Ford believes Geely has the potential to be a responsible future owner of Volvo."
Booth's remark could be applied equally to Geely's willingness to fund Volvo in Sweden and its ability to abide by industry norms when sharing IP. On the latter front, Chinese auto companies, and indeed China itself, have earned all the caution Ford brings to the negotiating table. It was only four years ago that General Motors Co. settled its suit against Chery Automobile Co. Ltd. for stealing a whole car design.
How much has changed since then? The same day Ford was identifying its preferred bidder, U.S. Commerce Secretary Gary Locke was in Guangzhou talking up the importance of protecting IP at a conference on the topic. And while the meeting itself is a sign of progress, the fact that Locke's speech was the umpteenth by a U.S. official on the subject over the last decade shows the intractability of the problem.
As multinationals well know, adopting laws in Beijing to protect patents and copyrights is one thing, while enforcing them in Guangdong province or Shanghai is another. Corporate dealmakers at companies in industries from chemicals to autos to aerospace have a rule of thumb on how to proceed when they partner in China: Leave your best technology at home, because you won't be able to protect it. Alas, that may not be an option for Ford, whose product pipeline is closely intertwined with Volvo's.
GM faced the same problem in selling a majority stake in Adam Opel GmbH to Magna International Inc. (NYSE:MGA) and its Russian partner. Though that deal has yet to close, GM apparently came up with provisions that make it feel safer.
But the stakes look higher in China, which is already gunning its automotive export engines. The conventional wisdom about IP protection in China has long been that the country will get better at it as it develops more of its own IP to protect. Multinationals have been trying to help things along, building major research facilities there and consulting on the IP regime in pharma and other areas. If Ford isn't already lending a hand, it may want to start. - Kenneth Klee
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