Geely's acquisition of Volvo sets good example: Swedish expert

08:53, August 13, 2010      

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The Chinese carmaker Geely Group 's acquisition of the Swedish brand Volvo from the U.S. auto giant GM set a good example for other Chinese enterprises to merge firms in other countries, said a Swedish expert in a recent interview with Xinhua.

"We have seen the same pattern is now repeated in the automotive industry. Maybe this will also start a much faster pace of acquisition where Chinese companies are requiring heavily in the years to come," said Martin Skold, assistant professor with the Center for Innovation and Operations Management at the Stockholm School of Economics.

Coming from an automotive-related business family and with rich experience in the car industry, Skold has been doing research on the industry for nearly 10 years.

The Geely Group has recently completed its acquisition of the Sweden-based Volvo Car, which used to belong to General Motors.

Skold said the deal was not unexpected.

"We have seen a shift for the last 15 or 10 years where Chinese activities have been very much intensified. We have seen (China's activities) almost in every industry and every business. So it is expected that we should see more activities within automotive industries as well from Chinese companies," Skold said.

He said the global financial crisis that started two years ago caused serious problems for American automakers such as GM, Chrysler and Ford, forcing them to sell the Swedish brands Saab and Volvo, which they bought in the 1990s.

"When we start to analyze the situation, we were thinking of what kind of companies are having money at the moment because the whole world was missing money. And then China has been managing the whole companies in a very smart and wise way over the last decades actually. So we are expected to see some kind of activities may be coming from China," Skold noted.

"We have seen those kind of activities in other industries where Chinese companies have bought western companies, but if I am perfectly informed, this is the first time a Chinese company buys western automotive company, so this is the first time in history actually, so this is really big from that perspective," Skold commented.

However, there will be a lot of challenges for Geely to manage the over-60-year-old Volvo.

"An example comes to my mind is that if you adopt a child for instance, then you normally adopt a small child as a mother or a father. Here you have another situation, you adopt an old grandmother, or an old grandfather for example with a whole lot of experiences and things like that. So what do you do? You have to listen to your child a little bit, but still you are the mother or father to this child. So that will be very interesting to see how will the management behind or the top executive management in Geely Group actually let this adopted child live in the structure of the Geely Group," Skold said.

The specific challenges can lie in the features of the brand and technology.

Skold said the Volvo brand is very much about security. And suppose Geely is more interested in other kinds of features of Volvo, then it could be a challenge.

"Another area of challenge is about technology. ... What we have seen in other situation is that if you combine totally different technologies, conflicting technologies, that can be a very challenging situation because sometimes technology is not interchangeable, you cannot take one technology and add that to another technological situation," Skold elaborated.

Geely has already shown its wisdom in keeping Volvo production in Sweden and continuing to use those workers and management.

"I am hopeful and a little bit certain that top executive management really has understood that the value of having knowledge from development in Sweden because that is the heart of the brand, so I think that will be important later on as well," said the expert.

He said it is also important to learn lessons from others and from the past.

"Successful companies, they tend to acquire really good companies, they have a good idea of how that specific company fits into a larger portfolio of brands and company, so you have a very clear idea and a very clear strategy, a clear vision on why you do that. If you know why you acquire a company or brand, then you can much easier manage it, you can organize for that company and you can together with that company arrange and produce strategies on how brands should be involved and what kind of values you should add into brand for future," Skold said.

Skold added that he would see more cooperation between western car producers and the Chinese in the years to come because Chinese car producers will be much more influential since it can reflect Chinese culture, interest and values for the Chinese market.

Source: Xinhua


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