Tuesday, March 30, 2010

What is behind the Geely’s Acquisition of Volvo?

Acquisition of Volvo@peterpeng210.blogspot.com

China's Geely Holding Group signed a deal with Ford Motor Co. in Sweden on March 28 of 2010 to make an acquisition of the US auto giant's Volvo car unit for nearly $1.8 billion.

This acquisition of Volvo is actually one big step of China’s strategy on automobile development. The newspaper People’s Daily, which belongs to China’s central government, said Geely was not solo in the acquisition, and behind Geely there were domestic banks, local government, and even the support of the central government. The newspaper also said, more importantly the acquisition was backed by the world’s largest new car market in China.

In the past 30 years, China’s auto industry have established many joint ventures with many big auto giants in the world, but it has not helped Chinese auto joint ventures on mastering core technologies. This acquisition of Volvo is a new effective trial for China to gain auto core technologies by taking the advantages of the world’s sluggish car market and China’s huge new car market space.

Geely Holding Group, headquartered in Hangzhou City, Zhejiang Province of China, is a major Chinese private automaker. The name of its Chairman of Board is Li Shufu. The group started to manufacture cars in 1998. Recently, it has several production bases and one automobile research institute in other cities of China with an annual output of 400,000 complete cars, 40 million car engines, and 40 million car transmission units. Except that a few of its cars went to middle east, only China’s domestic customers knew Geely’s cars before.