On Aug. 2 Geely's Chairman Li Shufu (L1) and Ford's CFO Lewis Booth attend a deal-closing ceremony. China's Zhejiang Geely Holding Group announced it had signed a deal with America's Ford Motor Co. to take over Sweden's Volvo Cars. [Xinhua]
On August 2, with the takeover of Volvo complete, Geely Chairman Li Shufu became head of the largest ever overseas acquisition made by a Chinese private manufacturer. For the first time, China has a transnational automobile group and its own world-renowned vehicle brand.
But so far it remains a deal made on paper. Important questions remain. Why did Li take such a huge risk? What are the advantages of Geely as a partner from the point of view of Volvo as a business? Can China use this investment to build a home-grown company as advanced as Volvo? Xinhuanet.com put these questions to Li Shufu.
Reporter: Volvo has an 80-year history and annual sales nine times larger than Geely's. Over the past two years, Geely's attempts to buy Volvo were frequently mocked and derided. Even now there is the suspicion that Volvo chose the Chinese market, not Geely.
Li: Let me give you an example of why Volvo chose Geely. Ford has a huge group of attorneys and the agreement went through thousands of revisions, so the entire acquisition process was very difficult.
At a critical moment in the negotiations, one of Ford's senior managers gave us his support. He was a previous president of Boeing we had had dealings with more than 10 years ago during the dispute over the Boeing trademark,
Although our use of the trademark was legal, Geely gave way out of respect for Boeing. This small incident impressed him and made him realize that Geely, even though a small company, respected international commercial culture.
Geely's acquisition was approved by China's Ministry of Commerce on July 29. Geely's plan had already been approved by anti-monopoly authorities in the EU and China. [Xinhua]
It was very difficult for Geely to purchase Volvo. When we first approached Ford in 2007 they did not give us a second thought. But China has a good policy that every proposed overseas merger must be filed with the National Development and Reform Commission (NDRC). So when Volvo finally saw that its only way out was through the China market, it had to choose Geely, thanks to that file.Although Ford has sold Volvo, it still has links to Volvo, and it inherited social responsibilities when Volvo went into bankrupt. The reason so many competitors failed to make the acquisition is that they were aiming to eliminate Volvo and turning its assets into cash.
Volvo chose Geely because of the Chinese market, our commercial culture, and because we are a private enterprise. But they would have been worried if they were relying solely on a private enterprise, so Geely made a number of cooperative agreements with state-owned enterprises.
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