Oct. 21 (Bloomberg) -- Geely Holding Group Co.’s 10-month effort to buy Volvo from Ford Motor Co. may fall apart within days as the companies struggle to agree on intellectual property rights, two people familiar with the talks said.

Geely and Ford officials are meeting in London this week to try to resolve the U.S. automaker’s concerns about sharing technology and future product plans, said the people, who asked not to be identified because the negotiations are private. Without an accord, Ford may opt to keep the Swedish unit, where losses are narrowing and sales are improving, the people said.

Concerns about intellectual property rights have hindered Chinese automakers’ attempts to make acquisitions, slowing overseas expansion plans. In July, General Motors Co. rejected an offer for Opel from Beijing Automotive Industry Holding Co. after failing to agree on safeguards for designs and technology, Xu Heyi, the Chinese company’s chairman, said on July 24.

“Volvo is completely integrated into Ford’s product development strategy, and Ford should be concerned about where its vehicle architectures will end up,” said Michael Robinet, a CSM Worldwide analyst in Northville, Michigan “This is akin to selling a room on your house. You can’t separate it easily.”

Ford, the only major U.S. automaker to avoid bankruptcy, put Volvo on the block in December as it shed overseas luxury lines to focus on its namesake brand. Geely, China’s biggest private automaker, is offering about $2 billion, less than a third what Ford paid a decade ago, people familiar with the talks have said.

Patent Concerns

The renewed talks about intellectual property follow the FBI’s Oct. 14 arrest of former Ford engineer Xiang Dong Yu, 47, who was charged with stealing more than 4,000 documents from the Dearborn, Michigan-based automaker in an effort to get a job with Shanghai Automotive Industry Corp., according to the U.S. indictment. Yu, also known as Mike Yu, eventually was hired by Beijing Auto, according to the indictment. He was at Ford from 1997 to 2007, according to the U.S. Justice Department.

The European Union and the U.S. have previously criticized China’s defense of intellectual property rights and the production of pirated goods. Automakers including Toyota Motor Corp. and GM’s South Korean unit have sued Chinese carmakers in patent disputes.

Product Insights

Any Volvo buyer would gain insight into Ford’s future products, which will still share Volvo technology and mechanical vehicle designs, the people said. Ford wants assurances that Geely will keep new-model blueprints secret, the people said.

Without those guarantees, Ford is prepared to put off plans to sell Volvo because the unit’s prospects are improving and it might command a better price when the economy recovers, the people said.

“We are still talking to interested parties,” said Mark Truby, a Ford spokesman, who declined to comment on whether talks could collapse without an agreement on intellectual property. “With any process like this, we wouldn’t want to provide a lot of detail prematurely.”

Geely spokesman Zhang Xiaodong declined to comment.

The Chinese automaker fell 1.8 percent to HK$2.81 at 11:25 a.m. in Hong Kong trading. Ford rose 14 cents, or 1.9 percent, to $7.71 yesterday in composite trading on the New York Stock Exchange. Ford has more than tripled this year, while Geely has quadrupled.

Ford also is negotiating with another bidder, known as the Crown group, which is led by former Ford director Michael Dingman, son James Dingman and Shamel Rushwin, a former manufacturing and labor executive at the automaker, people familiar with the discussions said. If talks falter with Geely, it isn’t clear whether Ford would still talk with other suitors or shelve a sale for now, the people said.

Keeping Volvo?

“One option could be to keep Volvo right now because it is Ford’s only international near-premium brand,” Robinet said. “Outside of North America, it’s just Ford and Volvo.”

Chief Executive Officer Alan Mulally, who came to Ford from Boeing Co. in 2006, decided to sell Volvo, Jaguar, Land Rover and Aston Martin to focus on the three U.S. brands: Ford, Lincoln and Mercury.

Ford lost $30 billion over the last three years and Mulally has said the company will break even or earn a profit in 2011 under his so-called One Ford restructuring plan.

Volvo’s U.S. sales rose 16 percent in September, bucking the 23 percent drop in the auto market. Year-to-date sales fell 22 percent through last month, compared with an industrywide decline of 27 percent. Still, while Volvo is trimming costs and improving performance after a $231 million second-quarter pretax loss, Ford is emphasizing U.S. brands, Truby said.

“We’re pleased with Volvo’s progress, but that doesn’t change the underlying rationale for pursuing a sale,” said Truby, who declined to comment on whether Ford might get a better price later.

To contact the reporter on this story: Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net; Cathy Chan in Hong Kong at kchan14@bloomberg.net.

Last Updated: October 21, 2009 07:02 EDT