Geely's Li: What does Geely gain from the Volvo deal?

14:41, July 08, 2010

By Li Shufu, chairman of Geely Holding Group

If Chinese automobile enterprises do not "go abroad" to purchase established enterprises and brands, they will unlikely be able to address the issue of branding over the next 20 years.

The transformation of a country's economic development mode should start with the transformation of the country's national economic development strategy. To enterprises, the transformation of the economic development mode is the transformation of their core competitiveness mode, or in essence the transformation of their concept of core values.

Geely has made certain progress in its strategic transition over recent years, which I think, was inseparable with our internationalized vision and strategy.

On March 28, Geely signed an agreement with U.S.-based Ford for the purchase of Volvo. In fact, I have believed since 2002 that there would be tremendous changes in the world economy and a dramatic adjustment in the automobile industry. I believed at the time that U.S.-based GM and Ford would go bankrupt, which many thought was impossible, but did happen.

Why did Geely take over Volvo? Chinese enterprises against the backdrop of globalization must be aware of their actual image, position and competitiveness in the world. I think that some tough issues currently facing Chinese automobile manufacturing enterprises will be difficult to address over the next 20 years.

Automobile branding can be taken as an example that China's automobile brands are just like the country's garment, shoe and hat brands 20 years ago. Although Chinese enterprises have improved product quality, foreigners have yet to recognize Chinese brands. It is just like that some may become millionaires instead of noblemen overnight and it is the same with the public recognition of brands.

How can we solve this problem? We can spend two or three decades trying to win the public's support little by little, or simply acquire a highly respected, world-renowned mature brand.

What has Geely gained from the acquisition of Volvo? The first is a 100 percent stake. The second includes the trademark, intellectual property rights, 10,963 patents, more than 10 series of sustainable products and product platforms, two whole companies with a production capacity of 500,000 vehicles a year, an engine company and three auto parts companies. The third is more than 3,800 R&D engineers, the entire talent-training and innovation system and 2,325 branches in over 100 countries including social service institutions and 4S stores.

"Bringing in and going global" is an important way of promoting the transformation of the economic development pattern. Purchasing Volvo is a result of economic globalization, which meets both Geely's own strategic demands and China's need for a new economic development pattern. In the future, Geely will keep the independence of Volvo in order to restore its competitiveness, respect its original core values and mature business system, consolidate and enlarge Volvo's shares of its traditional markets in Europe and the Americas, develop new markets in China and other countries and expand its product lines to satisfy various customers' demands for eco-friendly vehicles.

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