There has been considerable attention to Geely Holding Group after its acquisition of Volvo in 2009. According to a Financial Times report on March 11, culture clashes are not uncommon during cross-border business deals, and there are few partners more disparate than Volvo and Geely. However, after stumbling through its first couple of years, the Volvo is back on track and its marriage with Geely has entered a honeymoon period.
The 87-year-old Volvo is famed for its understated Scandinavian design and production quality, while Geely’s flagship product sells for roughly £10,000. Its first couple of years under Geely’s ownership was marked by falling sales and friction between the Volvo’s Swedish executives and Chinese owners. For the Chinese market, Geely executives want flashy and eye-catching cars, while Volvo emphasizes understated roots, the FT report said.
However, Volvo is back on track, officials told the Financial Times. Volvo’s Chief Executive Håkan Samuelsson said that despite of some restrictions, they have full freedom as long as they are inside the strategy, and there is no interference in operational level.
According to Yuan Xiaolin, head of the Office of Chairman Li Shufu and his spokesman in Sweden, Li Shufu has made it very clear that they have a strategy making sure the traditional brand that holds in Europe and the US needs to be maintained, while at the same time leveraging its opportunity in developing markets like China. There isn’t any ambiguity in the strategy or how Volvo will work together with Geely.
Volvo is almost halfway through a five-year, 11 billion dollars of investment plan that it hopes will turn it into a leaner, more global carmaker, and Geely holds the same expectation. Samuelsson also disclosed that as close to 250 million dollars of cost savings, Volvo will announce a “substantial” operating profit for 2013 this month, which makes further improvement on a break-even position in 2012. Meanwhile, working together with Geely, Volvo will design a new vehicle family, which will also be crucial to its future.
According to the FT report, Volvo’s future will depend on its operation in China and the US. Two sources familiar to the company’s strategy disclosed that increasing sales in the US and Europe will be mainly backed on the products with exclusive design, while sales growth in China would be fuelled by products share by Volvo and Geely.
Once described as “very entrepreneurial and willing to take risks,” by one member of the Volvo board, Li Shufu shot Geely into global prominence when he bought Volvo from Ford in 2010. With the launch of its new XC90 SUV this year, his influences on Volvo will be displayed to the wolrd. Volvo also expects to increase the usage of Chinese parts to 75 percent in some models, and will explore using China as a production base to sell to and supply to South East Asia.