Geely Automobile sold 222,000 units in the first half of 2012, up 4.2 percent over year-ago and outperforming its biggest rival BYD for the first time as the number two best seller in China's homegrown auto market. At a time when the total sales of all the homegrown brands slipped by 14 percent, Geely achieved encouraging growth, though its market share slightly declined from 3.5 percent in 2010 to 3.2 percent.

However, this decline resulted from the slower growth of the entire Chinese auto market in this year while Geely had progressed in product updating and profit margin improvement. Sales of the EC7, a model offered by its sub-brand Emgrand, increased by 24.8 percent to 60,800 units in the first half, a pretty good result for a homegrown model selling for 70,000-110,000 yuan.

The performance report of the first half announced by Geely showed that it generated total revenue of 11.2 billion yuan, up 6 percent over year-ago, and net profit of 1.02 billion yuan, a 9-percent improvement over year-ago. These figures speak for the automaker's growing profitability. As for overseas business, its exports rose by199 percent over year-ago to more than 40,000 vehicles, showing its increasing competitiveness in overseas markets.

Geely became the spotlight in July when the Fortune Global 500 2012 list was released and it was included in as the No. 475 corporation with its $23.3557-billion revenues (including Volvo's 2011 revenues). As China's first privately-run automaker entering the list, it demonstrated to the world the controversial acquisition of Volvo in 2010  proved to be a success story as it  had turned losses into gains.

Brand image of safety performance

On July 6, 2012, Geely Gleagle GX7 earned 5+-star rating with 50.3 scores in a C-NCAP crash test, the highest scores achieved by a China's homegrown auto brand in the history of C-NCAP, tying the Camry and the Accord for the fourth place among 172 models assessed in the test, according to the result released by China Automotive Technology and Research Center (CATARC).

"The safety performance of some homegrown brands can compete with those created by joint ventures", remarked Zhao Hang, Director of CATARC.

However they started up, some of China's homegrown brands have been well recognized by the market with their quality products, narrowing the gap between them and joint ventures. However, this progress has not shown in sales volume due to their weak brand impact or lack of it.

As one of them, Geely has impressed customers through building brand image. It is hard to chase after joint ventures in all aspects as auto products have many selling points, but China-based automakers can pursue breakthroughs with regard to one or two that can wow buyers, thus outdoing their rivals in the market.

Customers can easily form an impression about the image of a brand, such as Mercedes-Benz's luxury, BMW's operating performance, Volvo's safety performance and Toyota's reliability. Once they give a positive label to a brand, their overall impression about the brand will be lifted. That's how a brand builds their core competitiveness.

Geely chose safety performance as a breakthrough point. The company was not licensed as an automaker until 2001, but it began to transfer its target from "create affordable cars for common people" to "create the safest, the most environmentally-friendly and the most energy-efficient cars for the whole world" in 2007 when it published the Ningbo Announcement, in which safety was placed on the top.

In 2011, the company set up an Automotive Safety Technology Lab and developed the Geely Total Safety Management (GTSM) system on the basis of the R&D proposal of "retain four stars and seek for five stars" put forward by Zhao Fuquan, Vice President of Geely and head of the company's R&D Center. Now the lab has been staffed by more than 100 engineers who wed themselves to passive safety technology.

In 2008, Geely Vision model got four-star rating in a C-NCAP sampling assessment and in 2009, the Panda earned five stars. With the encouraging results, Zhao raised the target that 80 percent of Geely models created later should receive five-star rating in C-NCAP tests.

Then Geely had three models receiving C-NCAP five stars or above. The Emgrand EC7 earned four-star rating in a Euro-NCAP test, showing that the brand has been recognized internationally. In particular, the Gleagle GX7 earned five-plus stars in a C-NCAP test carried out this year, enhancing Geely's brand image as an automaker of safety.

Geely's two biggest rivals BYD and the Great Wall respectively set "new energy" and "professional SUV provider" as their selling points. However, being confronted with the uncertainty of new energy vehicles, BYD hasn't generated the effect it has been expecting while the Great Wall has benefited from its positioning of "concentration, profession and expert" as an SUV creator.

GGQ353 Strategy

Five-star rating for one of the aspects of a model speaks for its overall quality to some extent as a vehicle concerns systematic engineering. Seen from this point of view, Geely models have improved its overall quality with its safety performance enhanced.

In fact, the automaker has never been only satisfied with the "safety" label. Its Chairman Li Shufu proposed the GGQ353 Strategy on September 9, 2011. "GCQ" stands for "Geely Global Quality" while "353" means reducing the claim ratio by 50 percent within 3 years, becoming one of the top three automakers in terms of customer satisfaction.

The GGQ353 Strategy was first put into practice in Geely's Hangzhou Bay factory and then extended to all of its production bases.

To reduce the claim ration by 50 percent and to increase its customer satisfaction to one of the top three in China were two seemingly impossible tasks for a young automaker like Geely.

However, Li has made the controversial proposal possible with his strong will as he brought Geely into the auto industry in 1997 and has facilitated it in moving towards higher quality for over a decade.

In order to achieve world-class quality, Geely has learnt from top automakers in the world by means of benchmarking with Toyota, Volkswagen, GM and Hyundai in terms of  core indicators, including first pass yield, defect rate and duration for exchanging dies.

Its benchmarking is specified to each component. Geely compares both materials and technologies with their study objects and has set up a specialized quality analysis center and material analysis center to improve the two core aspects, Wu Guoda, Vice General Manager of Geely's Hangzhou Bay Base, told Auto Business Review magazine in an interview.

Through benchmarking of parameters, performance metric and quality, the gap between Geely's spare parts and whole vehicles and its targets are quantified, and then the company will improve them on the basis of an 5W1H analysis, namely, why, what, who, where, when and how.

For example, Geely's duration for exchanging dies on the stamping process was 15 minutes in 2009 while Beijing Hyundai only took 6 minutes, which is a demanding level requiring high technology and efficient. It set a target of reaching the Hyundai level in three years. In August, 2012, the Hangzhou Bay Base reduced the duration to 7 minutes within ten months.

The success resulted from a system of quality operation and quick improvement, which was worked out by divisions of production, die manufacturing, technology, and management and assembly teams. Heads of all divisions had to meet at the Kanban for Speeding up Die Exchange at 4 p.m. every day. Then they had to sign their names on an attendance list to confirm all the problems raised were learnt or solved. Problems they couldn't address should be reported to higher management.

Strength behind R&D system

The case of die exchanging demonstrates two major factors behind Geely's product quality improvement:  the staff's initiative and the strength of system.

Li has established the value that employees are the owners of a company and the core strength of the company's competitiveness. The GGQ353 Strategy is called a "meta-strength project" launched for pooling the employees' strength and stimulating their initiative and creativity, converting all these into the driving force and competitiveness of the company.

In order to motivate its employees working at the production line to innovate, the company has establish several awards to recognize, say, those who finds the best solution to cost cut or who puts forward a very good proposal.  The employees are encouraged physically and mentally so that they will contribute all they can to the management.

Employees are the core value of a company and they are respectable. This philosophy has been accepted by the management at different levels and the highest leadership of the company. "The level of a production base is not reflected from those automatic and mechanical objects, but the competence of employees and the management system", Wu said.

The Gleagle GX7 is not the only model receiving five-plus stars in C-NCAP tests, but the pricing of the other models nearly doubles that of it. That means Geely has made a good balance between quality and cost.

Zhao has pointed out that safety is a complex systematic project involving many parts and technology. Simple combination of high-tech with high configuration cannot necessarily result in high safety performance. The most important thing is the integration of a system that can work effectively.

In order to achieve five-plus stars, the company must ensure not only each part meets requirements, but also each one can work properly when integrated with others in the system.

"It is essential to increase investment into single key safety technology in order to produce quality products. But at the same time, only relying on the strength of an integrated system can help achieve top safety performance. That's why Geely can earn a high score at comparatively low cost", said Zhao in an interview with Auto Business Review magazine.

The system strength cannot be built without the effort of Zhao, who joined Geely in 2006. Before he came, Geely's R&D Center had assigned eight directors within five years, but little improvement was achieved as the CK model only received two stars in a C-NCAP test. It was Zhao who helped Geely build an entire R&D system and develop core technologies of powertrain.

Before 2006, each production base had an independent R&D institute. As a result, they didn't have universal drawings, technology standards, assessment standards and spare parts. Each model needed to be redesigned and tested again. Now the R&D Center has compiled universal operation manuals and standards that are applicable for all the bases, factories and posts.

Take safety as example. Geely has an indigenous GTSM system covering R&D, production and marketing. When a new project is kicked off, the Safety Technology Development division under the Whole Car Development System will be in charge of safety planning. Usually, it is divided into safety designing of key part system and matching of different systems. The former is finished by related divisions under the leadership of the Safety Part Development division while the latter is worked out by the Safety Technology Integration division.

After the first crash test, the Safety Technology Integration division will identify defects through comparing the test data with the CAE data given by the Engineering Analysis division. They will repeat the process for two or three times.

Matrix management is an innovative initiative of Geely's R&D system. Specific divisions are set up according to different development stages of each model. The development task is also divided into over ten mini projects, and a project team will be formed for each process. In each team, the project manager is responsible for coordinating, engineers for engineering and other workers for supporting work. Each team is only in charge of a single technical merit, forming a circulating R&D line.

At the beginning of this year, Geely made some adjustment to the matrix management. "We set a big project team for large project that has several project teams or divisions involved. The management of the production base involved should be team leaders and those divisions should all participate in the team. That means all the R&D strength of the company may be put into the team", said Zhao, who deemed the adjustment as combining different matrices vertically to give play to the largest strength of the R&D system.

Geely acquired the Australian automatic transmission manufacturer Drivertrain Systems International (DSI) in 2009 and bought Volvo in 2010 to obtain technology transfers. Benefiting from the two acquisitions, Geely has begun its transfer from "Safety Geely" to "Quality Geely".

Customer satisfaction with repair and maintenance

From 1998 to 2007, there were only 690,000 Geely cars on roads, but the number will increase to 2,350,000 by the end of 2012. This is a signal that the automaker has entered a new development period, but, at the same time, means a new challenge to its after-sales service, which is a fundamental factor to build up a company's reputation.

Geely has realized the importance of after-sales service since 2009, when it drew lessons from the past and began to take effective practices adopted by joint ventures through launching the "123 Quality Service Project".

"123" stands for a center—customer satisfaction as its center, two standards—service process standard and maintenance and repair standard, and three improvements with respect to maintenance technology, service image and staff competence.

"In the past, Geely commissioned service stations to offer maintenance and repair services. We had nothing to do with who to repair the cars, how to repair or if customers are satisfied with their services, but since 200, we have implemented management standards for all after-sales service stations to ensure customer satisfaction", Liu Jinliang, Vice President of Geely and General Manager of its sales and marketing told Auto Business Review.

The management standards include fingerprint attendance checking for service staff, control and pre-warning system for key posts and long-distance video inspection system for repair shops so that after-sales staff and service providing process can be brought under good control.

In  2010, the company has optimized its service stations through setting stricter rules for admittance with 212 outlets shut down and 126 new ones built; in 2011, 143 new standard service stations were added while 81 ole ones were closed. By June of 2012, Geely's after-sales service network had included 805 service stations, among which 266, 299 and 157 ones are respectively rated five, four and three stars. Three-star or above stations account for 81 percent and the number is expected to increase and those stations with national authorization improve their service quality faster than others.

According to the 2012 China Customer Service Index (CSI) Study report released by J.D. Power Asia Pacific, Inc. Geely's Gleagle, Englon and Emgrand outnumber the industry average and are respectively rated number one, two and four, out doing several joint venture brands, including FAW Toyota.

Geely has also built four systems with regard to customer satisfaction, service technology, service training and spare part guarantee in order to support and improve its service terminals, empowering its after-sales service system as it did for the R&D system.

Take long-distance repair technology as example. The automaker has constructed a passageway between factories and service stations for them to communicate about technical business and offer support o each other. It has realized effective contact, timely communication, information sharing and quick query about solutions to technical problems within the network nationwide. Meanwhile, the network integrated 7 modules with 28 functions: bulletins, repair cases, know-how forum, online exams, online training, technical support and members' center.

 "When a service station has no idea about what to do with some failure, they can report it to us through the system. We will announce a repair case as soon as we identify problems. In the past, it might take us half a month to settle a repair case, but now a few hours are enough. If the failure is not included in our failure database, our engineers will trace it and insert it into the repair system so as to help other service stations that may encounter the same problem," according to Liu.

Since the online repair system was launched, it has had 17,629 registered users and has been visited for 2.5 million times. By now it has offered help for 983 times with 21,965 repair cases and 3,655 classic cases included in its database. Since the implementation of the"123 Quality Service Project", the response rate (response in 2 hours) to complaint settling has reached 87 percent, effectively increasing its customer satisfaction. Auto Business Review deems the process as Geely's self-evident ambition to grow into a stronger automaker.

A few years ago, people might think they would lose face buying Geely cars, but today the Emgrand EC7 has achieved a monthly sales volume of over10, 000 units. This is the biggest breakthrough Geely has made.