Analysing strategic issues in geely automobile

The Case of Geely Motors. Shift in Global OutputSource:

Analysing strategic issues in geely automobile

Have an opinion about this story? Click here to submit a Letter to the Editorand we may publish it in print. Li Shufu, a farmer's son from China's Zhejiang province who last week become the unlikely chairman of Volvo Cars, was looking for some cheer from Ford Motor Co.

A year earlier, a new model made by his company Geely, which means auspicious in Mandarin, had made an unfortunate debut at the Detroit show.

Unable to get space in the main hall, Geely Automobile Holdings parked its homely sedan in the lobby of Cobo Hall, where it looked forlorn during an annual black tie gala.

The chrome lettering on the drably named MRA model on display had been unevenly applied, the tires were dirty and only partly inflated, and the interior was heavy on plastic. Li, now 47, had succeeded in China by marketing "the world's cheapest car" to an emerging middle class in the country's inland cities.

But his Geely model was mercilessly panned in America. You get what you pay for, people said.

Analysing strategic issues in geely automobile

Li abruptly abandoned plans to take the U. Leclair, a lifelong veteran of Ford's finance operations, took that first meeting with Li in Januarywith freezing rain pounding against the glass office windows at One American Road in suburban Detroit, as a courtesy call.

His focus for months had been trying to stop the staggering cash burn at Ford. The Geely visit, people involved in the preparations say, barely hit the radar for Ford's senior management.

Li, on the other hand, was excited, though the meeting never got beyond polite generalities. The next "VW Bug" was panned throughout the industry. Now his ambition was to have a renowned luxury brand in the stable of one of China's biggest private automaker.

Thus began a roller-coaster journey ending with Li's purchase of Volvo Cars from Ford, and crowned this month by his appointment as chairman of the Swedish auto icon.

It is the biggest acquisition of an international auto marque by a Chinese enterprise and will be scrutinized closely in the months to come. China's track record in acquiring international brands has been mixed at best, particularly in the auto industry.

Chinese officials this year squelched plans by a little-known machinery maker to buy the Hummer from GM. China's attempts at piggy-backing on a big brand name have stumbled badly over issues of management, marketing, use of technology, dealing with unions, and cultural integration.

Assuming approval by China's regulators, Geely faces an additional challenge of turning around a company with an expensive cost base and with a stodgy image as a maker of safe but boring cars.

So when Li and Leclair met for a second time during the Detroit show, the finance chief was intrigued when the cherub-cheeked Chinese billionaire made an offer for Volvo, which was bleeding money for Ford at a time when the world's fourth-largest automaker was trying to keep itself afloat.

New sense of urgency As months of working-level talks dragged on over the deal, the global financial architecture started to get shaky.

The American auto industry, dependent on a web of consumer financing mechanisms, was plunging into crisis. Li found himself the jilted suitor again.

By Decemberwith credit markets paralyzed and Ford's cross-town rivals GM and Chrysler lurching toward bankruptcy, Mulally was ready to listen to offers for Volvo again. John Thornton, a Ford director and former Goldman Sachs executive working in China, met with Li in Beijing days after the announcement.

The Geely bid had new life and nine months later it was named the preferred bidder. Reuters Legacy of failures The agreement is the latest example of China's growing clout on the international stage.

Automobile Industry: The Case of Geely Motors - [PPT Powerpoint]

It also reflects Beijing's aspirations to build global brands that carry both prestige and higher profit margins in a drive to transform China from workshop of the world to a name that equates with quality and innovation.

It's been a work in progress. The previous auto deals weren't the only debacles. Both of those would end in failure, as the two TCLs struggled to turn around businesses in foreign countries with very different labor practices and costs.

Lenovo struggled to turn around IBM's Western-focused business, but after a wrenching restructuring, it has played down those assets and returned to its roots as an emerging markets specialist.

Geely hopes to flourish where others foundered. Li, usually a voluble executive who loves to discuss cars, his philosophy, and plans for Volvo, declined requests for interviews while the takeover awaits regulatory approval.

That is bound to change. Over the course of the deal, China surpassed the United States to become the world's largest auto market, as the industry underwent painful restructuring during the global downturn. The world's third-largest economy also became home to four of the world's 10 largest banks.Zhejiang Geely Holding Group has reached agreement with Cevian Capital (Cevian), an activist fund manager, to acquire its entire % share capital holding and % voting rights in AB Volvo, the Swedish manufacturer of trucks, buses, construction equipment, diesel engines, and marine and industrial engines.

A Tesla car in Germany. A Five Forces analysis (Porter’s model) of Tesla Inc. (formerly Tesla Motors, Inc.) points to competition as the biggest force in the automotive industry environment. Altair Receives Geely Best Partner Award Altair today announced that Geely Automobile Research Institute Virtual Performance Development Department has awarded Altair as "Best Partner" in This is the first year that Geely Automobile Research Institute has established a supplier recognition program, and Altair is the only simulation.

Management Discussion & Analysis Directors & Senior Management Profiles Corporate Governance Report Zhejiang Kingkong Automobile Company Limited and Hunan Geely Automobile Components Company Limited, is set out below: GEELY AUTOMOBILE HOLDINGS LIMITED. New Jersey Graphic & Sign Company, Brussian Strokes, Inc., is a full-service One-stop shop for all your Sign & Graphic needs in East Hanover, New Jersey.

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Geely has started to push its own Chinese car brands in Asia and the Middle East, and entertains hopes of entering the American market over the next few years. But if the Volvo brand fails to help.

Special Report: Saving Volvo - Geely buys brand, management test | Reuters