So it's now official - that Volvo Cars (Volvo Trucks is an entirely separate and independent entity) have been sold to the Chinese of Geely for USD 1.8 billion. What a dramatic turn for a brand founded in 1927 as a spin-off from Swedish bearings giant SKF (still remains one of the largest bearings maker today). The early young Volvo was then led by Assar Gabrielsson and Gustav Larson, guided by the pragmatic logic that cars are driven by people, and thus the main guiding principle for Volvo must be to protect lives. Many of the very basic features that we take for granted in today's cars were pioneered by Volvo. True, there are many car makers too boast of significant innovations in the area of safety - but there is one clear difference. Volvo's advancements in safety were not made in anticipation of tightening regulations or their trends, but Volvo's own data collection from a team of engineers that spent decades collecting and analysing real world accidents data. Seatbelt reminders, front and rear were present since the 240 series of the 1980s, long before European legislation required them to.
In 1998, the Volvo Group decided to sell its less profitable cars division to the Americans at Ford Motor Co, as part of Ford's then so-called Premier Automotive Group (PAG) which comprised of Jaguar, Land Rover and Aston Martin - a move which a decade later would proved to be a bad decision. PAG was a financial black hole for Ford and a disastrous "lost years" for these illustrious brands.
From left : CEO of Volvo Cars Stephen ODell, Chairman of Zhejiang Geely Holding Group Li Shufu, Chief Financial Officer of Ford Lewis Booth.
March 2010 would be another turning point in the brand's history as the company once again changed hands from the Americans to Chinese. Li Shufu, the chairman of Zhejiang Geely Holding Group have assured investors that Volvo's existing plants its traditional heartland of Sweden will remain and new Volvo plants in China will not make them redundant. And he has also assured the market that it will be business as usual for Volvo, still led by their current team of management. Contrary to popular perception, Chinese companies are not that dumb to spend billions to purchase foreign car brands only to have them run to the ground by incompetent management inexperienced with managing a global car brand.
But for Volvo fans - the appeal in Volvo cars is the philosophy behind their design. Unpretentious, functional, environmental friendly but not in a hypocritical Prius kind of way, family friendly, safe not because how EuroNCAP tests says so but safe in the real world when driven by real people on real roads, robust and reliable (at least up to the 240 series). Though these are the very reasons why Volvo lost market to BMW and Mercedes, in a market that increasingly wants more bells, whistles, pomp and splendour. Old Volvos just refuse to die easily and their owners loved them so much that they don't see a need to change them often enough!
The concern should never be about crappy quality Chinese built cars. In fact, with additional capital injection the new generation Volvo cars built with Chinese money could be the most sophisticated ever with even higher levels of quality. What should be a valid concern, at least in this author's own opinion is that Volvo will be turned around to become an Audi or BMW or Mercedes. It's not difficult to understand this because this is where the market is going and this is the direction Geely has to take Volvo to if it wants to make money out of it. Not many appreciates functional, sedate looking Volvo sedan with babies and parents friendly designs. People want large heavy teutonic German cars with loud designs - think of the latest BMW models.
Volvo, being a very European-centric company is a company largely built on the post-enlightenment European philosophy of tolerance, reason and humanity. Humanity, that key word that separates Swedish and Chinese culture. The respect for values of humanity is what motivates Volvo to pursue their goals of safety. China has no history of a strong worker's union and an even poorer record of respecting fair treatment of individuals, particularly the working class. Which is an irony for a nation that once prided itself with the ideals of a classes society. With a cheap base in China, it is difficult to see how will Volvo's traditional Trollhattan in the long term, Li Shufu's initial promise and rhetoric aside. What will happen when Li eventually steps down?
With a resurgent China, I doubt the Chinese, including Geely, will again let white men tell them how they should conduct their businesses, in respecting people and the environment. This is not just an ego issue, but a cultural thing and a historical legacy drilled into Chinese students.
Hundreds of years ago when the Middle Kingdom was the strongest civilization in the world while Europe was largely a barbaric land rife with religious wars, tensions between serfs and land owning princes, rulers who still believe strongly in powers of sorcery and spirits, and accuse odd women of being witches. The Middle Kingdom was an orderly empire with strict codes of conducts at imperial courts, judiciary system with many scholars and great poets and had already sailed around the world, it already has market places with standardised currency and scales and Chinese merchants sailed around the world, while Europeans thought the Earth was flat. The Chinese thought white men how to make paper, use compass to navigate their ships, gunpowder. About hundred years later the white men returned with their steam ships and used gunpowder in guns and demanded that Canton be completely opened for trade with European products that the Chinese have no interest in. When they refused the white men introduced opium, and when Chinese rulers tried to stamp out opium the Europeans destroyed the imperial Summer Palace with their cannons and thousands of years worth of art and history gone. Later they imported a philosophy from a particular German guy named Karl Marx, and ended up putting a man named Mao at the top. 50 million died in the "Great Leap Forward."
Western analysts are saying this and that about the Geely-Volvo deal, that buying brands is a short cut and that China will not able to bring the brand further, etc etc. But now China has woken up from its almost century old slumber and healed old wounds from the traumatic Cultural Revolution. This time, I don't think the Chinese are going to pay much attention to what the white men are saying. In fact, Li believes that he is "unleashing the tiger of Volvo" that has long been caged.
Related link : 2010 Volvo S60 and Geely's Bid for Volvo
1 comments:
Pity the folks who work for Volvo. They must be shaking in their boots now.
Hard to say which direction the Chinese would want to go. When I was shopping for a car, I looked at Mercedes, BMW, Infiniti - definitely not Volvo due to their grandparent-friendly, outdated looking designs. They strike me as the Buick of Europe.
So if the Chinese want to keep the status quo, then they gotta do what they're good at by lowering cost. Hard to do that without making serious changes.
On the other hand, they could spice up their lines - the Chinese have already proven themselves able and willing to copy any look easily. But then again, those copycat cars wouldn't be a Volvo anymore, would it?
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