Joel Backaler
Joel Backaler

In his book China Goes West: Everything You Need to Know About Chinese Companies Going Global author Joel Backaler describes how Geely bought Volvo. An example of how China´s business leaders do things differently. From an excerpt at his weblog.

Joel Backaler:

Ever the ambitious visionary, Li (Shufu, Chairman of Chinese automaker Geely) had his sights set on Volvo early. Through Li’s research, he had learned Volvo was never a strategic brand for its American owner, Ford Motors. This is because Ford has been and remains primarily a mass-market car company; as a premium brand, Volvo was out-of-reach for many of Ford’s target consumers. As early as 2002, Li began contacting Ford, to try to convince them to take his intention to buy Volvo seriously. He sent letters to Ford’s senior management and networked with them at auto shows, but without success. Li took his first trip to Ford’s headquarters in Detroit to visit its Chief Financial Officer in 2007, but he did not receive a warm welcome. Instead, Li was met with concerns about his ability to raise sufficient capital for a deal, and was reminded of the fact that Geely was a relative unknown in the West. At the time of his first visit Volvo was not nearly as troubled as it was about to become, but Li had his heart set on acquiring the Volvo brand from Ford at all costs.It wasn’t until the 2008 global financial crisis occurred that Ford’s leadership finally became receptive to Li’s proposition. Li began to rack up miles on overseas flights to Detroit and Gothenburg, Sweden, where Volvo was based. To appease Volvo’s senior management, Li committed early on to ensure Volvo’s headquarters stayed in Sweden and its leadership team remained intact. Geely’s acquisition of Volvo would keep 16,000 local employees at their jobs. Back in China, Li communicated with regulatory authorities to make them aware of the potential acquisition and procedural obstacles before they arose later on to impede the deal’s progress. Li effectively painted the picture of a win-win situation for all parties involved in the acquisition. In fact, many of Li’s fellow Chinese automotive executives believe that one of the greatest talents he brings to the table is public relations.

Li also wooed the Swedish leadership team of Volvo by emphasizing the vast untapped potential of the Chinese auto market. He argued that while the US, Germany, and France had all been major markets for Volvo in the past, they were highly competitive and increasingly saturated. China was not only the world’s largest auto market; it also had tremendous growth potential given China’s historical absence of car ownership. There were 62 million automobiles on China’s roads in 2009, which some projected would grow to reach 200 million by 2020. By selling China as the world’s largest automobile market, Li helped paint a path of opportunity for future growth, and a chance to make Volvo profitable in China. Li also underscored the potential for selling Volvo’s European premium brand to China’s growing population of luxury consumers. With Li offering the localized know-how to navigate the intricacies of doing business in China, Volvo’s management saw how they could benefit from the acquisition by Geely.

In August 2010, the farm boy from Hangzhou, China, officially acquired the movie star from Gothenburg, Sweden, for $1.5 billion. By 2013, China became Volvo’s most profitable market, where it produced 42,000 automobiles. Doug Speck, Senior Vice-President of Sales and Marketing for Volvo told the Financial Times in a 2013 interview: “We expect a significant bump-up from localization.” Management expects annual sales to increase to 200,000 by 2015 after the Chinese government officially recognizes Volvo as a local firm through Geely’s ownership in 2014. Li Shufu fulfilled his commitment to open new markets for Volvo, while acquiring a global luxury car brand to help boost Geely’s international image.

 More at the China Business Review.

Joel Backaler is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

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