When Volvo Met Geely

By staff reporter LU RUCAI

On March 28, 2010, Li Shufu, chairman of Zhejiang Geely Holding Group, and Lewis Booth, CFO of Ford, sign the Volvo acquisition agreement.

ALTHOUGH Ford and Geely are veritable fishes in a same pond, they share little in common: the former one of the oldest carmakers in the world and the founding father of the modern auto industry that has been around since 1903; the later a small Chinese startup born in the late 1990s, barely known outside of China. In March 2010, the two signed an agreement, and Geely became the new master of Volvo.

Upon his return from the signing ceremony in Gothenburg, Sweden, Li Shufu, chairman of the Zhejiang Geely Holding Group, was immediately besieged by a throng of journalists home and abroad, clamoring for details of the deal. The acquisition cost Geely roughly US$ 1.8 billion but gave the company an 100 percent share holding in Volvo in return, along with all intellectual property rights in the critical areas of safety and environment-friendly technologies, what Li Shufu regarded as "the biggest quarry."

The Brotherhood

"A takeover doesn't always mean a merger. Geely and Volvo will remain separate entities; their relations are like that of brothers, not father and son." Throughout the purchase process, Li Shufu always stressed this point. He even made a promise that upon completion of the deal, Volvo would still be an independent operation with its own management team based in Gothenburg. However, this explanation could hardly resolve domestic consumers' curiosity.

In the Chinese auto market, Geely, even with its bold attempts to upgrade its image on a strategic basis, still remains stuck as a producer of cheaper, compact cars that are unable to meet upscale rigorous safety and environmental regulations. So indubitably, there was nothing more than the intellectual property rights that Li desired from Volvo. As he confessed, the long-awaited acquisition of Volvo was a precision move targeted at its blood-forming organs. The terms of the deal guaranteed Geely partial access to prime Volvo technologies.