New Geely has ample reasons to acquire Volvo image

A month ago, Geely insiders told some reporters that it was going to acquire Volvo. At that time the media overwhelmingly believed that Geely’s acquisition of Volvo would be nothing but a publicity stunt.

In fact, from the global auto industry and Chinese auto market perspectives, Geely’s purchase of Volvo seems to be matter something much simpler. If the bid is successful, we do not have to worry about Volvo’s development.

Since the last century, the Volvo brand has been transferred from one owner to another, but its position in people’s minds has not changed. At least Geely — its possible buyer this time, is a professional carmaker, rather than a trader.

For Geely to buy Volvo, money may be an obstacle, but will not be a permanent one. The biggest obstacles may exist in Geely and Volvo themselves: Geely’s determination and strength, Volvo’s pride and pragmatism. Renault’s arrogance led to its divorce from Volvo, whose car brand was then sold to Ford Motor. Volvo admitted it was a large company of a small country, which means that when the economic crisis occurs and Sweden is unable to feed a big company, Volvo will definitely embark on the road for sale.

This time amid the global economic crisis, Sweden and the United States have met with problems and must find new buyers for Volvo. Ford will not care about Volvo after benefitting from selling Jaguar and Land Rover brands, and becoming the only bankruptcy-free carmaker of the U.S. Big Three, and now Ford, who has been seeking another opportunity, finds Geely is the most suitable buyer of Volvo!

Where Volvo is concerned, what can support the cash flow is not the acquisition fund but the future market, The BRIC (Brazil, Russia, India, China) markets are the final options, and of these markets, China is the largest, most mature, most stable one. These factors determine that only China is a suitable destination for Volvo.

Learning from the lesson of SAIC and Nanjing Auto vying for the Rover brand, this time the Chinese civil strife is really hard to occur again, so we would be positive to see the success of the acquisition. Optimism about the acquisition comes from that fact that the current Geely is very different from the former Geely for three reasons:

Frist, Geely acquisition focuses on the content rather than the form – the maturity of M&A thinking

Considering the SAIC lessons of Ssangyong and Rover acquisitions, Geely and the Chinese industry should be able to be united as one, strive for consensus on industrial upgrading. Geely’s announcement of the Volvo acquisition has been sincere and consistent, which can help stabilize the Volvo trade union and to meet the essential requirements of the Swedish government. This shows that the overseas M&A (mergers and acquisitions) thinking of China’s auto industry is getting mature.

Second, from the CFO to the 200-member team – the advantages of accumulated management talent

Geely Auto’s CFO Yin Daqing is a mysterious master, who has played a key role in Geely’s activities from the Hong Kong listing to overseas operations, to domestic investment. As an expert who emerged from the ups and downs of Brilliance Auto, Yu knows very well the relations between capital operation and corporate strategy. Geely has now made staggering advance in the market and the capital operation. Later, Geely poached Liu Xiangyang and other masters from home appliance giant Haier, a move that demonstrates the new carmaker’s courage and vision in rounding up top-notch talents in the country.

In the Volvo-acquisition talks with Ford, Geely has fielded a 200-people negotiation team, showing that Geely has its talent advantage — Geely is not what it was like a decade ago.

Third, from an imitator to an innovator: its independent R&D upgrade

In Geely’s Ningbo and Linhai production bases, the production line layout, production method and quality control have improved a lot. Especially in the independent research and development (R&D), Geely has formed its own system, and its product performance is more extensive. It is even approaching some Japanese and South Korean carmakers in many aspects. Its new products have no feel of copycats as in the past but become even more original, sophisticated and graceful.

Source: Gasgoo