Ford's Sale Of Volvo To Chinese Automaker Geely Nearly Complete

July 30, 2010

Just yesterday we got word that the Chinese commerce division will OK the sale of Ford-owned Volvo to Chinese firm Geely Automotive. Perhaps no foreign acquisition has more ramifications for the auto industry than the sale of Volvo to a Chinese company. With Geely comes the first global scale takeover of an international company by a Chinese manufacturer. Many pundits are saying that the cultural and ideological differences between the two companies are too vast and insurmountable. Work ethics, cultural differences, even language have been sited as obstacles. This couldn't be further from the truth. Geely as the pioneering Chinese company has no option but to succeed. An undertaking of this magnitude is not without calculations. I believe time will reveal a management style very "Western" in principle with the foundation of a no-nonsense diligent Chinese firm. Are there going to be questions of Volvo's practices, of course. However, Geely is buying Volvo for it's manufacturing processes and safety technologies and these are not disputable in value and practice to Geely.  

Volvo, since it's high point in 2007, has wallowed due to the step-child mentality of Ford's paradigm of "One Ford". Volvo has been choking under the weight of the highest legacy costs of all manufacturers. There was no doubt for Ford that Volvo had to go. However, I believe that of all internationally manufactured automobiles there is the most room for growth in Volvo. European sales are up as they are across China. In order to regain profitability, all Geely has to do is open the world's largest auto market, China, which they are assured to do. The writing is on the wall. All government and bureaucratic entities will be compelled to buy Volvo as it will be the de facto Chinese company. So where does this leave Americans that want to buy the premier Swedish brand?

For U.S. sales the verdict is still up in the air. Europe is going to remain the first and primary market, China will most undoubtebly be second, thus making the U.S. the bronze market. However, a dedicated ownership and attention to the market, albeit third, is better than a inattentive and absent partnership with Ford. Geely has to improve and fast. Product is old and outdated and marketing, once iconic and remarkable, is non-existent. I look for a slow and methodical build-up, as this is the Chinese way. Chairman Li Shifu will be looking to promote Volvo as a highly regarded Swedish company, now owned by the Chinese, and not as a new Chinese company that was formerly Swedish. He will have to maintain the identity of Volvo while working and intermingling the Chinese way. His difficulty will be not allowing the admittedly cost-saving but quality-lacking methods bleed the image of Volvo. In the end, the influx of money and attention will make for a welcome change in Gotthenborg, Sweden but once the ink is dry on the contracts and papers, where will the company go? I believe that if the quality does not erode there will be a smashing success but that is, like most things in China, a really big "if". All eyes will be focused on China.

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