One of the toughest struggles in the negotiations was just
how interwoven Volvo had become with the wider Ford Motor Group
including safety and in-car-entertainment equipment. Volvo
shared engine platforms and parts with Ford brands, while it
relied on hardware and electronic-architecture work done at
"Ford and Volvo are, to this day, still very intermeshed,"
says Cox at Rothschild.
Leaks in October highlighted disagreements over patents and
intellectual property rights that threatened to kill the deal.
In the end, the takeover terms gave Geely some of the
technology. Ford got to keep other bits, but has to license
some of it to Geely for use in its own operations. That should
allow Geely to improve the quality of its own cars, and grow
As the talks progressed, the Geely team faced a huge public
relations task to convince Swedish and Chinese stakeholders the
deal made sense and wouldn't end up like other failed Chinese
Volvo's powerful unions worried factory jobs might take a
fast boat to China.
"We didn't know what Geely was, or at least I didn't," said
Maria Akterius, who leads a team of about 40 at Volvo's factory
in Torslanda, on the outskirts of Volvo's Gothenburg
"I have to say, I was a bit worried back then because my
thoughts were like, 'Now the company will move to China and
I'll be left without a job.' That was my first reaction."
The Swedish media also played up concerns production might
move to China, given the huge disparity in labour costs. That
in turn put pressure on the Swedish government.
Li played a key role in selling the deal to the unions.
"When they (union officials at a Volvo plant in Belgium)
asked me to tell them in three words why I want to buy Volvo, I
said 'I love you'," Li told Shanghai TV after the deal was
signed. "I had studied Volvo for many years and know it so
well." The union didn't show its affection for the deal
until just before the 10,000-page deal was signed in March, and
only after receiving reassurances about job security.
Like Volvo's European plants, Geely's state-of-the-art
factory in the port city of Ningbo, just across Hangzhou Bay
from Shanghai, is highly automated. Unlike Volvo, its shops are
not unionised. And despite the recent wave of labour unrest in
China's factories, particularly those with some foreign
ownership, the workers seem proud of their indigenous
"I feel lucky to work for a company like Geely," said one
young man, who gave his surname as Wang, during a recent visit
to Geely's Ningbo plant. "It's been growing very fast and I
feel I have a future here."
Geely plans to build a Volvo plant in China that would
nearly double its annual global production, and aims to sell
150,000 Volvo cars in China annually by 2015. It has yet to
pick a site for the plant, but Shanghai is a likely candidate.
That appears to be a major selling point in getting Chinese
NOTHING IN THE WAY
Two agencies have the power to veto the sale, the Ministry
of Commerce and the National Reform and Development Commission
(NDRC), China's powerful state planner, whose approval would be
required for any major new investments by Geely.
Auto analysts say China's approval is almost certain and
nothing seems to stand in the way of Geely and Ford concluding
the takeover in the third quarter, the stated closing date for
But the road after that looks no less rocky than the
journey to bring the deal to fruition. Opinions are divided on
Geely's turnaround strategy for Volvo based on achieving
greater economies of scale, not to mention its lack of
experience managing a foreign firm.
"I have been through a lot of mergers and acquisitions in
my career and they are difficult, even in the same culture,"
said Scott Laprise, an analyst at CLSA bank.
"You are dealing with limitations, especially manufacturing
outside the country. Your management experience is only within
China and now you are going to expand outside the country."
Geely has said Volvo is already moving back toward the
black as the global recession recedes.
"We need to see how it will be managed," said John Russell,
CEO of London Taxi Co, which is part-owned by Geely. "Obviously
there is a bigger opportunity for Volvo in China ... Volvo has
potential in its current form and I think Geely wants to see
that grow and see Volvo achieve its potential in the world."
China's main problems with overseas M&A owe more to lack of
homework and preparation than any other intrinsic problems,
said Wang Dazong, president of BAIC, a rival bidder for Volvo,
which acquired rights to some car designs from GM's Saab last
"Any company can fail," Wang said. "What you need to do in
advance is a thorough analysis and after acquisition really
focus on integration ... You need to ask yourself, 'Why are you
doing it? What do you want?' and also have a clear strategic
Li has maintained throughout that Geely must keep Volvo as
a separate Western premier brand -- and grow that brand -- for
the turnaround to succeed.
"Volvo's biggest problem is that its scale is too small,"
Li told reporters in China after flying back from Sweden
following the signing ceremony. "Profits can only be realised
after the scale is expanded to bring down per-unit costs."
"Geely and Volvo will be brothers, not father and son."
(Additional reporting by Quentin Webb in London, Michael Wei
and Jean Yoon in Beijing; writing by Doug Young; Editing by