Geely's bottom line is 100% ownership

Abstract: For Volvo, Geely's biggest advantage is the opportunities in China. In fact, to build up factories and to reach 100 million's quantity of output is just the slogan, not the most practical advantage.

21st Century Business Herald reports that the executives of Geely are increasingly cautious of their announces. November 27, Geely's spokesman Yuan Xiaolin stopped where he should stop when he answered number of media questions.

But he expressed one point very clearly: Geely aims 100% ownership of Volvo. The reporter learned from the relevant channels that this is the bottom line of the negotiation between Li Shufu and Volvo. Most critical is that Geely would obtain Volvo's key technologies and intellectual property through the acquisition. 100 percent holdings and also the access to core technology resources are the biggest differences between the acquisition of Geely-Volvo and Tengzhong-Hummer

Obviously, this negotiation has only one solution, but there are still a lot of unknowns. One detail, which can represent Li Shufu's mediation with different stakeholders, is in 16th November, Li Shufu went from Beijing to London, and headed to Belgium and Sweden. He paid official visits of the deputy prime ministers of these two countries, who are in charge of industry and energy, as well as the two country's trade union leaders and Volvo's management executives .

But there are still lurkers in the dashing area. 21st Century Business Herald learned that two funds join the bidding war of Volvo. One is from Sweden, which is formed by Volvo's top executives and leaders of Swedish auto trade union. The other is the CROWN fund composed by former directors of Ford.

Are negotiation opponents playing game or is there another mysteries behind? Only staring at the rear-view mirror obviously can't give us an answer.

Only clear is that Chinese market with golden opportunities is the biggest cards in Geely's hand, which is enough for Li Shufu to drive the bidding car.

　　The bottom line

Yuan Xiaolin told reporter in November 27 that the two parties was having a detailed and in-depth discussions of relevant terms and contracts. The negotiations was going smoothly.

Li Shufu's this trip to Europe is not only to introduce the situation to the stakeholders, but also to get further informations about the thoughts of the government, trade union representatives about this merger, such as how to arrangements employees and how to deal with pensions and other key issues. Volvo's two European factories are located in Belgium and Sweden. .

In the process of the negotiation between Geely and Ford, the intellectual property is always the focus of the outside world's attention.

Yuan Xiaolin expressed clearly, first of all, Geely is the preferred bidder of Ford to buy 100 percent of Volvo. Secondly, Volvo will retain ownership of its key technologies and intellectual property, and also reserve the right to use all the intellectual-property rights of Ford for the purpose of bringing into effect of the established business plan. In addition, through the Volvo purchase, Geely will own the ownership of Volvo's key technologies and intellectual property rights, and also has the right to use a lot of intellectual property, including those related to safety and the environment.

Reporter finds out from relevant resources that to acquire 100% Volvo is the bottom line of Li Shufu's negotiation. It reminds Li Shufu that SAIC Motor exited Ssangyong last year. It cannot own shares and holdings, but must purchase completely.

　　Why Li Shufu is so confident?

Expert of the field said, comparing with foreign bidders, Chinese market is the largest card of Geely's hand.

"For Volvo, Geely's biggest advantage is the opportunities in China. In fact, to build up factories and reach 100 million's quantity of output is just the slogan, not the most practical advantage. And Geely doesn't bring the most capitals to Volvo. Volvo and Ford focus actually on the developing opportunities in the whole Chinese market." the source said.

He thought, Ford doesn't just want to sell Volvo out, but has further consideration about "Chinese market". "Does Ford right now just try to sell Volvo completely, or want to save part of the holdings in order to create an alliance of Ford-Geely-Volvo. At this stage, We still cannot see clearly. "

"If it is the second cooperation, for Li Shufu, Ford Motor in fact has a better chance.". He said. But clearly, this kind of cooperation has been already eliminated by Geely

"Now the general question in Detroit is whether there is corresponding people in Geely who could eat up Volvo. Even it can afford buying, whether it can be managed well, is the biggest challenge." Tan mingan, president of Detroit Chinese Business Association told the reporter during the interview.

Otherwise, the in-depth problems couldn't be solved by Ford. For Geely, who rashes to enter Europe, it is a great challenge, whether can find an actually "problem solving" approach in the shortest period of time."

　　Two funds join the competition.

The question whether snake can swallow elephant, is clearly a bit too early to consider.

Two funds don't want Geely laugh to the end.According to sources, one buyout fund is from Sweden. "The key person are Volvo's executives, and leader of Swedish auto trade union. The fund also includes the financial institutions which have daily business relationship with Volvo. This consortium has a strong Swedish background. "

The well-informed pointed out that one point can be seen, because members of the trade union are not from the Volvo factory, but from executives of the national Swedish auto trade unions. Therefore, the starting point of this fund is not just simple purchase from management, but the local national industry and the Swedish automotive industry with the character of "Nationalism"

Basing on the relevant informations found by the reporter, this fund is likely the fund organized by the labour union of Volvo's engineers and an association of other Swedish national trade unions. The Volvo's engineer labour union is formed by 1800 engineers. But this fund's name cannot be found in details.

The union members are the majority of the working population in Sweden. The most powerful labour members are over millions. As strong voting group, the Swedish government received the support of trade unions and came into power. At the same time, Sweden is essentially a high-welfare socialist country - The income taxes of business and individuals collected by the whole country are as high as 40% or more, while the government uses this amount of money to provide their citizens a very strong social safety network.

Under the powerful government and labour union, the enterprises and the negotiation's status of the two sides are very different comparing to American auto industry.

"The other fund is the former global director of Ford Motor Company. He is very familiar with Volvo. Therefore, he led and organized this buyout fund. This fund has American background and also owns deep personal connections in the auto industry." the sources said.

According to the inquiry of the reporter, this company's name is CROWN formed by the former Ford's director Michael Dingman. CROWN will bid formally at next Monday. The quotation will be 2-2.5 billions dollar, which will be slightly higher than the current offer from Geely.

The fund CROWN deployed by Trans-Atlantic (600558) may be from the industrial standpoint, taking fancy to the Volvo's brand and products. Because the leader himself is former executive of Ford, who understands extremely well Volvo and knows its internal value, so he has the idea of acquisition.

The reporter contacted Li Shufu about the news of this two funds involving in the acquisition. His attitude is very clear: "We engage in a fair competition".

　　Related News

Geely said acquisition of Volvo is not impetuous, and it will acquire 100% ownership.

In 27th, Gelly Group informed reporters in Beijing the latest developments about the acquisition of Volvo. The spokesman of this project Yuan Xiaolin said, the series of complex business negotiations with Ford have been progressing. On October 28, Ford announced Geely as the preferred bidder. The contacts of both sides have been fully developing and concentrating on detailed discussions about the terms of the contract.

The acquisition agreement will accord with the best interests of all parties.

Although many details are not convenient to be discussed, Yuan Xiaolin said, one thing is certain: the agreement, which will reach with Ford, will fit for best interests of all parties, including Geely, Ford, Volvo and other relevant stakeholders. At present, the acquisition project is progressing forward intensely orderly, and positively. This deal involves not only Geely, Ford, Volvo, but also suppliers, distributors, workers, trade unions, government and all kinds of aspects. The final agreement must be consistent with the best interests of all the concerned parties, which is a win-win situation. It is the foundation of the agreement.

Recently, Geely's chairman Li Shufu's just finished trip to Europe is to conduct frank and efficient communication to buy Volvo with Volvo's management, the senior government officers of Sweden and Belgium, the delegates of various Volvo's auto trade unions. Geely introduced the relevant circumstances to the stakeholders, and also find out further concerns and thoughts of the government, the representatives of the labour union about this merger. For this visit, he summed up: "A series of meetings and communications are enthusiastic, positive and constructive"

Yuan Xiaolin said, Geely applied the approval of the project strictly according to the relevant state laws and regulations. In the vetting process, Geely maintained contacts with the relevant government departments. He said, Geely has fully prepared financial capitals which has strong support from banks.

　　To acquire 100% ownership of Volvo

About the issue of intellectual property rights to acquire Volvo, Yuan Xiaolin emphasized three sentences: First, Geely is the preferred bidder of Ford to buy 100% Volvo. Second, Volvo will reserve its key technologies, intellectual property and the right to use all the intellectual-property rights of Ford for the purpose of bringing into effect of the established business plan. Third, through the purchase of Volvo, Geely will own the ownership of Volvo's key technologies and intellectual property, and also has the right to use a lot of intellectual property, including those related to safety and the environment. He said: "This is an accurate description of the consensus about intellectual property rights, which are reached by Geely and Ford."

Although the global automotive sales are suffered from negative environment, Volvo has a strong brand and first-class technology, combining with the demands of luxury cars in the developed countries and emerging markets. Geely expects good prospects from the company after the acquisition. Geely will devote to protecting the brand and value of Volvo and is able to bring a lot to this deal. One very important thing is, Geely has profound knowledges and abundant experiences of the development of Asia, especially in Chinese market. China has a automotive market with huge potentials. Combing the advantage of Volvo's brand and products with the profound knowledges of Geely about Chinese market, Geely will use all kinds of the methods to explore this potential

　　To participate Volvo's acquisition is the Geely's achievements in all these years.

Yuan Xiaolin said, to participate Volvo's acquisition is not just an unrational thought, but the deliberate strategic decision. Geely carry out full demonstrations and careful preparation, which has invested a lot of time, manpower, financial and material resources. Geely will adhere to this strategy.

As the new force of Chinese auto industry, Geely has made remarkable progresses in these years. To participate to buy Volvo is the outcome of Geely's developments during all these years. In the bidding process led by Ford, Geely as one side planed carefully, prepared well, and participated actively

Yuan Xiaolin admitted, as a young, dynamic, vibrant and progressive company, despite some international merger experiences, Geely does face a series of challenges for such a complex task of the acquisition of Volvo. All Geely can do is to try their best to stride forward toward the success. The effort includes Geely's own team, and consultant team, and of course also the concern and support of friends from different fields.

He said, Geely shouldn't be seen just as a thin small team. Geely has not only its own team, but also hires international top investment banks, accounting firms, law firms and PR companys to work together to help the project step by step to achieve the success. As the preferred bidder, Geely is under detailed negotiations with Ford to clear the way of the acquisition in order to achieve the final success.

　　Volvo will maintain the independence of management under the Geely's system.

Yuan Xiaolin said, if the acquisition is successful, Volvo will maintain the independence of management under Geely's system to consolidate the brand's leading position in the field of luxury family cars and sport leisure travel vehicles, which are all revealed through the Volvo's recognition of safety and cutting-edge technology. Geely Group hopes to develop Volvo's brand in the high-end automotive field, and wish the Volvo's management to operate in accordance with its independent business plan. Under the framework of the new ownership, the current Volvo's production, research and development facilities, the labour union's agreements and distribution's network will be remained. At the same time, Volvo will enhance further the sale network and purchase channels of the important automotive markets in China. Geely Group's deep perception could help Volvo to improve the brand's competitiveness continuously in order to bring more chances for Volvo.

He told reporter, listed company Geely Auto didn't participate this acquisition, didn't provide any financial support, and will not involve in any Volvo's activities in China. There is no competition between Volvo and listed company Geely Auto. Because they have different market segments. The Chinese auto market has huge potentials. Geely will take effective measures using the profound understanding about the Chinese market and the advantages of Volvo's products to increase the market shares.(Jianfei Keke)

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