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Geely's eyes bigger than its Volvo stomach?
Source: Xinhua |
December 30, 2009, Wednesday
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AT a time when the world auto industry was experiencing huge difficulties caused by the global downturn, Geely's aim to global seems very ambitious.
The latest move in Geely's going-global strategy was the high-profile bid for Volvo, the almost century-old Swedish luxury car brand. The United States auto maker Ford Motor Co. said last Wednesday that it was close to finalizing a deal to sell Volvo to Geely, China's largest privately owned car maker.
Ford put Volvo on sale in December last year and confirmed it had picked Geely as the preferred bidder on October 28. No details were given on the price tag, but it was rumored that Geely was prepared to pay around US$2 billion for Volvo, about one third as much as Ford spent to acquire it in 1999.
Some media commented that Geely's eyes are bigger than its stomach for acquiring an unprofitable Volvo, which posted US$1.5 billion loss in 2008.
Li Shufu, founder and chairman of Geely, had his own idea. "It (the Volvo bid) is related to the new energy-powered vehicle," he told Xinhua.
"The new energy-powered vehicle will be the future of the world's auto industry. Based on current investment in research and development, China will be left far behind the pace of developed countries," he said.
Although Li declined to disclose details about the negotiation because of a confidential contract, the 46-year-old entrepreneur acknowledged that negotiations over intellectual property rights (IPRs) involved in the acquisition were "more complicated" than the price.
The significance of the deal is far beyond the acquisition of advanced technology, however. It affords shortcut for Geely to get access to the world auto market, said Zhao Hang, director of China Automotive Technology and Research Center.
Geely would keep intact Volvo's existing production and research and development facilities, union agreements and dealer networks.
According to Li, Volvo has the brand and technology while Geely, based on the booming Chinese market, could help Volvo reduce production costs and tap into the huge market.
China is expected to sell more than 13 million vehicles this year, up more than 40 percent from 2008. Geely netted a profit of 560 million yuan (US$82 million) in the first half of the year, up 110 percent year on year. It aims to sell 300,000 vehicles this year, up from 204,000 units in 2008.
The latest move in Geely's going-global strategy was the high-profile bid for Volvo, the almost century-old Swedish luxury car brand. The United States auto maker Ford Motor Co. said last Wednesday that it was close to finalizing a deal to sell Volvo to Geely, China's largest privately owned car maker.
Ford put Volvo on sale in December last year and confirmed it had picked Geely as the preferred bidder on October 28. No details were given on the price tag, but it was rumored that Geely was prepared to pay around US$2 billion for Volvo, about one third as much as Ford spent to acquire it in 1999.
Some media commented that Geely's eyes are bigger than its stomach for acquiring an unprofitable Volvo, which posted US$1.5 billion loss in 2008.
Li Shufu, founder and chairman of Geely, had his own idea. "It (the Volvo bid) is related to the new energy-powered vehicle," he told Xinhua.
"The new energy-powered vehicle will be the future of the world's auto industry. Based on current investment in research and development, China will be left far behind the pace of developed countries," he said.
Although Li declined to disclose details about the negotiation because of a confidential contract, the 46-year-old entrepreneur acknowledged that negotiations over intellectual property rights (IPRs) involved in the acquisition were "more complicated" than the price.
The significance of the deal is far beyond the acquisition of advanced technology, however. It affords shortcut for Geely to get access to the world auto market, said Zhao Hang, director of China Automotive Technology and Research Center.
Geely would keep intact Volvo's existing production and research and development facilities, union agreements and dealer networks.
According to Li, Volvo has the brand and technology while Geely, based on the booming Chinese market, could help Volvo reduce production costs and tap into the huge market.
China is expected to sell more than 13 million vehicles this year, up more than 40 percent from 2008. Geely netted a profit of 560 million yuan (US$82 million) in the first half of the year, up 110 percent year on year. It aims to sell 300,000 vehicles this year, up from 204,000 units in 2008.
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