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Geely's Li Shufu gives the lowdown on Volvo deal

By Wen Ying: 0 Comments Print E-mail Chin.a.org.cn, August 6, 2010

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Geely's EMGRAND on the production line. [Xinhua]

Reporter: Before the purchase of Volvo you had built a business from scratch to a position where it was worth 30 billion yuan on the Hong Kong stock market. But Geely's annual profits won't even cover Volvo's staff costs and threaten to bankrupt the company and destroy all your achievements. Isn't this a wild gamble with no fallback position? After all, there have been few success stories among China's overseas mergers and acquisitions. Have you considered the consequences of failure?

Li: I make cars for money. I thought about purchasing Volvo as early as 2002 when Geely first got a permit to make cars. Having invested 2 billion yuan, I already had all my eggs in this basket.

Even when I was running a fridge factory, I stripped my car down and rebuilt it. At that time I wanted China to have its own top-of-the-range car – an enterprise that would be respected like Volvo – so at the outset I wanted to register the brand name as Boeing cars.

Volvo's headquarters in Sweden's Goteborg. [Xinhua]

To purchase Volvo has been my dream for years. But we were also forced into it. China's car market is so competitive that if we do not enter the high-end of the industry we will end up a failure. So if Geely wants to survive, overseas acquisitions are the only way out. By trading capital for time, we may survive.

Among the enterprises that preceded us, Lenovo made a huge success while the Hummer merger failed. But no matter how many failures there are, it is undeniable that the mixing of cultures brought about by mergers and acquisitions is the cradle of great enterprises. Cultural differences are a good thing in themselves and good management can give birth to great hybrids. Just as human beings do not progress if they only marry inside their tribal groups, so it is with enterprises.