Chinese Automaker Looking For More Global Reach As It Bids For Ailing Swedish Brand
China Daily cites unverified reports today that China’s Geely Automotive has made the only “concrete” bid for the ailing Swedish automaker Volvo. If the reports by an unnamed Swedish newspaper prove correct, a successful bid for Volvo could mean the domestic Chinese automaker could be one (large) step closer to developing into a truly global brand, achieving its ambitions to produce luxury vehicles alongside the budget models that have made it popular in mainland China. However, since most major Chinese brands lack practical experience managing foreign workforces or doing business in developed automotive markets like Europe and the US, any potential acquisition by Geely would be either a distant possibility or simply unfeasible from the get-go. As these reports are, still, unverified, they have been whispered about before — however, we still have to take a wait-and-see attitude to this developing story.
Li Fangfang, who writes often on the automotive industry and particularly the way that domestic Chinese automakers are using the global economic crisis as a sort of springboard for their nascent brands, points out that Volvo’s potential sale could present unique opportunities but also serious challenges for Geely:
An insider at Geely told China Daily that executives in the company had signed confidentiality agreements on any potential sale, indicating a deal was on the cards.
However, Ford Motor (China) Ltd’s public relations manager Ouyang Lingfang said the company had no updated information about any sale of Volvo.
“Ford has concluded that the Volvo brand will likely be sold, which is reflected in the company’s ‘held for sale’ accounting status,” China Daily was told in an email statement from Ford. “It is premature to discuss pricing, timing or potential bidders.”
Jia Xinguang, chief analyst with the Chinese National Automotive Industry Consulting and Development Corp, said: “It’s still too early to say that the potential acquisition of Volvo by Geely is beneficial or detrimental, as Geely’s chairman Li Shufu never toes the corporate line. But as Geely is ambitious to enter the premium car segment, acquiring Volvo’s brand and assets as well technologies is a shortcut.”
The Hangzhou-based automaker, originally best known for its low-priced cars, launched luxury brand Emgrand in July. At the same time it debuted its first mid-to-high segment model, the EC7 sedan, showing its determination to enlarge its product portfolio to include the high-end segment.
But Jia said he still doubted whether Geely would go through with the deal.
“The acquisition not only includes the brand and technology which will positively help Geely on its future development, but also involves Volvo’s factory, employees in Sweden and many dealers, parts suppliers even debts overseas,” he said. “Geely should think hard whether buying Volvo would be a good thing.”