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Volvo and Geely clash on China expansion

Volvo and Geely clash on China expansion

Published: 03 Dec 2010 10:50 GMT+01:00
Updated: 03 Dec 2010 10:50 GMT+01:00

Volvo Cars and its Chinese owner Geely appear headed on a collision course regarding Volvo's expansion in China, the Financial Times reported late on Thursday.

Geely, which acquired the Swedish car maker from US giant Ford in August, said in September it planned to increase Volvo sales to 300,000 cars a year in China alone.

Company chairman Li Shufu said he wanted three new Volvo plants in China to produce that volume. However, Volvo's management wants to hold off on expansion for now, the Financial Times said Friday.

Members of Volvo's Gothenburg-based management "will not decide about investing if they don't have a business case with black figures and good margin," a person familiar with the discussions the British newspaper.

The person described the discussions as "heated, not acrimonious."

Volvo spokesman Per-Åke Fröberg told AFP on Friday that Volvo and Geely were in talks over expansion in China and that management would take a decision on "the first step of localised production in China...within a couple of months."

"It's a natural thing that there are discussions about such an important matter as the Volvo car strategy for China," he said.

When Geely and Ford closed Volvo's purchase in August, Li said Volvo would "remain true to its core values of safety, quality, environmental care and modern Scandinavian design."

He added the brand would strengthen the existing European and North American markets and expand its presence in China and other emerging markets.

Li "has a very strong belief in the future of Volvo in China and has a vision of up to three factories over a long period," Fröberg said.

"That doesn't mean that he thinks decisions should not be based upon a firm and sustainable business plan," he said.

Volvo already builds its S40 and S80 models in China, through a partnership between former owner Ford and Chinese rival Chang'an. The brand is set to sell around 30,000 Volvos in China this year, half of which are imported.

Chinese state media said in October that China, the world's largest auto market, thad become the third-largest market for Volvo.

AFP/The Local (news@thelocal.se)

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Your comments about this article

13:00 December 3, 2010 by Thebinary1
How is this actually news since such a conflict was inevitable even when Geely was being considered as a suitor!

A marriage between a dictator and a free/liberal thinker is impossible to work.
15:46 December 3, 2010 by Rolf100
Just to understand; Ford bought Volvo and then sold it to Geely rather than shut it down. So Geely owns Volvo and Volvo believes it has rights?
20:35 December 3, 2010 by saar
@Rolf100

Yes, Volvo has rights, because Chinese can't make cars. Volvo can.Without Swedes there will be no Volvo but chinese crap called Volvo.
20:39 December 3, 2010 by volvoman9
That didn't take long. How will we pronounce Volvo in the future... Wolwo,... Bolbo?
22:59 December 3, 2010 by voidplay
The Chinese are thinking we brought them we made some commitments, we try to keep our 'commitment' but we make cars for the Chinese in China, and probably find an excuse to shut down the Swedish factory if it hits our bottom line.

The Swedish Volvo execs are thinking, oh they make all those cars in China and soon they would be competing with the Swedish factory and we would have to shut down. Why not come up with some arbitrarily low market projections for China and then export them at exorbitant rates. The Chinese workers will work overtime making Volvo scale models, so that they can pay for Swedish social system, long holidays, and sick payment and parental leave and ........
08:42 December 4, 2010 by PonceDeLeon
Silly, Geely. They actually expected the people at Volvo to "Go To Work!" As we say in the olde country "Buena Suerte Sr. Li.."
08:44 December 4, 2010 by Keith #5083
@Rolf

I totally agree with you.But then Li Shufu is a rather special man - even in China.

@Saar

With Swedes there was no Volvo - you didn't want to support it's future. Ford did. Geely did - but Swedes did not.As for "Chinese crap", I bet there is a lot more of it in your house than you know about. Your PC for example that you write your comments on to post here or your modem-router, and a few more things like that. True patriotism begins in the wallet, not in the mouth.

And Yes, Volvo's are very very special cars.Why is it foreigners understand this but so many Swedes don't?
11:52 December 4, 2010 by saar
@Keith #5083

"You", "yourself", "your house" - do you know me? No. So,speak for yourself.
16:21 December 4, 2010 by Keith #5083
@saar

Oh, I thought since you were so good at generalising in your comments you could not possibly object to someone else doing the same.

Just out of interest, what, following your argument, is the difference between 'chinese crap' and 'American crap' ? Or do you consider Ford to be a European/Scandinavian company?
09:24 December 5, 2010 by saar
Just for you to know, I do not have/use any Chinese products DEVELOPED or copied by Chinese. What I have/use are "Made in China" products developed by western/Japanese/Korean companies. See the difference? I don't care who bankroll what, as long as it is safe/reliable/stylish/whatever. When Chinese start making such products themselves, I'll buy them too. So far Chinese own products are mostly crap.

If Volvo becomes 100% Chinese(R&D, Design and Production,etc.), I'm not going to buy it.
12:56 December 5, 2010 by Keith #5083
Yep. The difference is very clear. If it's a western company specifying what they want and sticking their label on it, then it's ok that it's made in China.

If it's a chinese company selling OEM to western companies, with Western labels on it, then it's ok.

If it's a chinese company selling directly under it's own label...then it's not OK.

I guess that kind of blows Huawei products off your list, but not off major telecom companies lists.

So, with this logic, Volvo was Volvo even when it was Ford, but not now that it is Geely.

Yep. It's very clear to me.
15:31 December 5, 2010 by Horace
Saar,

I think one of Keith's points that might not be clear to you is that regardless of where a product is said to be developed, there are a lot of components in there that came from suppliers outside of the company, and a lot of them are Chinese.

So when Volvo was Ford, even though the design HQ is in Gothenburg, chances are there were many components designed and made in other countries such as USA or China.
19:22 December 5, 2010 by saar
Hoarce,

have you read my post?

Keith, there are a lot of products coming from China that are not crap. I'm talking about consumer products, not steel pipes, telecom parts and fertilizers. So,yes, Huawei products are off my list. If I ever need them and they are good I'll buy them.

There is a company called Haier, their appliances are cheap and good.Pure Chinese. I used them when I was living in US. Chinese cars? No thanks, I don't want to die young.
21:33 December 5, 2010 by Keith #5083
#Saar

Ok. I take your point.

I don't think the issue of safety with Chinese cars applies as they will have to meet European safety standards anyway to be able to be sold in Europe.Certainly they will have to meet Swedish standards to be sold in Sweden.

My essential point about Geely and Volvo is this - Li Shufu really is a very special man.His private company is not state owned and it is generally accepted that the State has Li Shufu in a rather special category. He's an amazing businessman by any western standard, unbelievable by Chinese standards.

I do not believe that this ownership scenario will be detrimental to Volvo.Certainly not as detrimental as I believe the previous owners were. Shock absorbers failing on 18 month old Volvos? There had to be something wrong with that cost-cutting production exercise.
21:57 December 5, 2010 by AcoomodationStockholm
Hi everybody..think of this scenario: Volvo cars will be produced in China, then it will be productive, then the Chinese will later announce it can no longer maintain Volvo Sweden because of the high cost of production. So they will shut down the Swedish plant and retain the ones in China...got it?

Then the Swedes or others who are used to the Volvo culture will have to import Volvo cars from China.... do you see that?

Sweden ...wake up!!
22:15 December 5, 2010 by wenddiver
I think the designed in your country but we said to hell with your workers we are going to build it in a Dictatorship are worse than products designed and built in the ditatorship. This will be the first year that I won' be adding a Lennox Chna ornament to my tree. They come in beautiful Red boxes that say "American Orignals" , but when you flip them over they say "Made in China".

The Fiesta company makes a lot of noise about being an American Product and their dishes are made in America, but on the same display they have boxes of Spoons and Forks that are Fiesta ware, but made in China.

I would tather buy a Swedish Product made in Sweden, an American Product made in America and a Chinese product truthfully labeled. If anybody has a list of Swedish products that have not abandoned their workers and fled to China, please post it.
19:07 December 6, 2010 by mkvgtired
Just be careful about intellectual property in China. I have a feeling that many Western companies will learn a very expensive lesson that could potentially bankrupt them.

http://online.wsj.com/article/SB10001424052748704679204575646472655698844.html
22:11 December 6, 2010 by Emmaboda
Production of Volvo cars in Sweden, will end within 5 years, mark my words. You had no interest in Volvo cars for years. Ford poured a lot of dough into it, and that still wasn't good enough. Getting something is always easy, hang onto it, is a different story. Make sure you don't let Volvo Trucks and Buses go as well!!!!!!!!!!! After all I like Saab's much better in any case.
16:29 December 12, 2010 by grr
Hmmmm....I'm on my 4th Volvo, wondering what I'll purchase next. Guess I'm hoping an all electric will appear before I have to make that decision.
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