Geely buys Volvo with great significance

Ford was close to finalizing a deal to sell Volvo to Geely, China’s largest private carmaker. According to Xinhua net, all substantial commercial terms relating to the sale of Volvo had been settled on 23th. However, purchase of Volvo has raised wide doubts whether Geely will keep Volvo, almost century-old luxury car brand, will be running or not. Some even considered Geely's move as having mouth bigger than the stomach for acquiring an unprofitable Volvo. In this regard, Li shufu, the founder and chairman of Zhejiang Geely Holding Group, accepted a special interview from Xinhua news agency and made responses to the China’s largest overseas acquisition for the first time.

　　Let Chinese cars go global, instead of just letting global cars be sold in China

In 1999, Volvo was purchased by Ford for 6.45 billion USD, which is three times higher than Geely’s offer. Nevertheless, Volvo suffered great pretax loss of as much as 1.5billion USD and owned Ford a debt of 3.5 billion USD till Ford put Volvo on sale in 2008.

Whether it is worth or not to bid 2 billion USD for an unprofitable Volvo purchase, Li shufu had his own idea. “Volvo purchase is related to the new energy-powered vehicle.” Li told Xinhua news agency, “New energy-powered vehicle will be the future of the world’s auto industry. But based on current investment in research and development, China will be left far behind the pace of developed countries”. Ford and Volvo have already invested millions of dollars over the past decade in terms of new energy technology. In this regard, Geely’s offer is quite worthwhile.

　　Of course, new energy technology is not the only reason for Li shufu to bid for Volvo

Li was interested in Volvo as early as 2002, when he was given permission for sedan production. It was him, the manager of refrigerator factory, that led his workers to build up the first private-made automobile. He has already invested 2 billion Yuan for achieving his dream of car production.

Li shufu once made his workers produce a model by his own Benz dismantled, and his initial dream is to produce China’s Mercedes Benz. Although he had to start from low-end vehicles for survival, he never gave up his dream to enter the first- class automakers camp.

“Volvo purchase will benefit our country and people, which is same as Geely’s idea.” Li said, “Geely will produce the most sturdy and energy-saving vehicle in the world. Let Chinese cars go global, instead of just letting global cars be sold in China.”

Li shufu has already summed up the deal into 3 layers of significance: firstly, Volvo purchase is a way for Chinese cars to enter the global market. Secondly, the deal will enhance national brand and lead China’s vehicles ascend in the global stage. The last but not the least, domestic consumers will benefit from the deal a lot.

In terms of production and sales, favorite brands and market share, Geely is still in the early stages of development. The acquisition of Volvo with 80 years of history, widely recognized as the safest car in the world, may accelerate Geely’s dream. Of course, the key to success depends on the negotiations over intellectual property rights. It's also the greatest difficulty faced by American automakers, such as General Motors and Ford, when they are divested of Europe brands. As sellers, American automakers tried to maximize their benefits in terms of intellectual property rights and patented technology, when they are divested of capital and brand. Li shufu admitted that negotiations over the issue of intellectual property rights involved in the acquisition were more complicated than the deal’s price.

　　Nothing will change for Volvo, and so for Geely

“If Geely successfully ties the knot with Volvo, nothing will change for Volvo, except the boss turns to Li Shufu." Li told the official Xinhua news agency. "Volvo and Geely will be two independently-managed brands."

At present, the two sides have already reached the newest consensus: Volvo will still stick to its independent commercial plan and carry out its operation. With new ownership, Volvo's current production, research and development facilities, union agreements and dealer networks will all be left intact. In other words, Geely intends to maintain Volvo’s pure blood in terms of technology, brand and enterprise culture, rather than people's speculation that Geely would destroy this century-old brand.

“We will keep counting on Volvo’s original teamwork, after all they are more professional than us.” whether Geely will be able to send a qualified team to manage Volvo, Li shufu replied to the doubt from the outside. “Austria DSI and Manganese Bronze Holdings PLC in the United Kingdom, have been purchased for one year till now, we haven’t sent anyone to those companies? Why we have to do so?”

According to Li shufu, as to enterprises acquisition, the only thing to need for change is performance evaluation and system of rewards and penalties. After the acquiring of DSI and Manganese Bronze Holdings PLC, Li shufu thought it is most important to set up new system of enterprise management, as well as assessment system for individuals or departments with foreign executive leaders. “It seems like Hong Kong people govern Hong Kong.” Li said with a smile.(translator:qinghua serena)

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