Top Biz News

Li consummates his love of Volvo

By Liu Yiyu (China Daily)
Updated: 2010-01-11 08:00

To Li Shufu, chairman of Zhejiang Geely Holdings Group, his pursuit of Swedish luxury brand Volvo is the story of a swain courting a princess.

Last month when the Zhejiang-based Geely settled commercial terms to buy the Sweden-based Volvo division from US company Ford for an estimated price of $2 billion, the Chinese businessman finally received a nod of approval from his regal heartthrob.

Li Shufu started viewing Volvo as a potential acquisition target in 2002 shortly after securing a license to produce cars. This was four years after the former refrigerator plant manager and his workers developed China's first car made by a private automaker.

To survive, Li had to start with manufacturing low-end cars. The Geely brand was once the personification of cheap cars. But he never gave up his dream of becoming a first-class automotive producer.

"My dream is to make the safest, most environmentally-friendly and most energy-efficient cars and sell China-made cars to the world, instead of letting foreign cars enter the whole of China," Li said.

Li had sent a letter of intention over the acquisition of the Volvo car unit to Ford Motors one year before the global credit crisis. This was ignored until the economic downturn forced Ford to peel off the Volvo brand and to continue the implementation of its One Ford Strategy.

Two years after Li's first application, Geely, whose annual sales surged 28 percent yearly to 16.5 billion yuan in 2009, was named by Ford Motors as the preferred bidder of its Volvo car unit.

According to Li Shufu, the takeover of Volvo has three implications: Firstly, buying Volvo will give China-made cars an access to the world auto market; secondly, it is of great strategic significance to enhance the image of a Chinese independent brand and enable China-made cars to have a share in the global stage; thirdly, it will benefit domestic consumers.

Doubts, however, are arising. People began to worry that even if the Volvo deal is finally sealed, success isn't guaranteed for the developing Chinese automaker. For Geely, which is still in its infancy in terms of output, sales volume, brand awareness and market share, to carry on Volvo's reputation of sturdiness and safety would not be easy. There would also be problems managing a loss-making brand that others had failed to run successfully.

On the other hand, purchasing Volvo, which has been around for 80 years and is known as "the company that builds the safest cars in the world", may help Geely realize its dreams earlier than expected.

"If the deal succeeds, nothing will change for Volvo except that the boss will be Li Shufu," Li said. "Volvo and Geely will be two independently-managed brands."

To the Zhejiang-born entrepreneur who regards cars as "nothing but four wheels plus two couches" - meaning that making cars is not as difficult as people think - assembling the safest Geely car for everyone is his ambition.