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Analysis: Volvo before and after its acquisition by Geely

Carmen Lee From Gasgoo.com| October 26 , 2016 23:56 BJT

When Geely acquired Volvo in March 2010, the Chinese manufacturer’s CEO Li Shufu compared the Swedish brand to a tiger that, in his words, “we need to release.” Many analysts explained his comment as a snide remark at Volvo’s previous owner, Ford.

Analysis: Volvo before and after its acquisition by Geely

In 1990, Ford, which was at the time the world’s second largest automaker, was looking to expand out of its native US into the European market. At that time it made a lot of noteworthy purchases of upscale European brands like Aston Martin, Land Rover, Jaguar and, of course, Volvo. These brands were all placed under Ford’s Premier Automotive Group (PAG), formed in 1999. However, the PAG posted terrible sales numbers soon after its establishment. In 2004 it reported a total deficit of $362 million, with the Jaguar brand accounting for the largest amount of losses. Volvo, which previously performed well with several strong models, also started seeing its performance slip. In 2005 Volvo’s staff was cut by approximately 1,500 members as restructuring plans were put into place. 

Despite these setbacks, the Volvo brand remained PAG’s most valuable. Merrill Lynch estimated that selling Volvo would bring in $7 billion to $8 billion for Ford. This attracted the interest of many other rival automakers, among them BMW.

Analysis: Volvo before and after its acquisition by Geely

It was under this background that Ford entered into negotiations with Geely regarding the transfer of Volvo near the end of 2009. Ford, which had recently suffered massive deficits, reached an agreement with Geely the following March. Not long before Ford had already sold Jaguar and Land Rover to Indian company Tata Motors. Ford agreed to a price of $1.8 for Volvo in order to pay off its huge mounting debts.

Volvo’s performance did not change a great deal because of the sale. Back in 2005, the manufacturer’s annual global sales exceeded the 500,000 mark for the first time; its sales in the European and American markets grew 10.6% and 24.3%, respectively. By comparison, its sales over the first half of this year grew 10.3% in Europe and 24.8% in the US. While its sales in the Chinese market have only increased 6.3% over that same time period, the fact remains China is still Volvo’s largest market internationally. 

Even now Volvo is still priding itself on its safety. In a publicity stunt for both the Swedish manufacturer and the Chinese government, a XC90 drove across the new glass bridge at Zhangjiajie Grand Canyon this June. Volvo has also announced plans to implement new technology that will allow owners to directly use their phones to unlock the vehicle. 

Volvo has also announced that it will eliminate all deaths in its cars by 2020. A lot of the key technology that is to be critical in achieving this goal has already been researched on and implemented in its current vehicles. This plan actually dates from back in 2008. Volvo has also had quite some history in this field, with it forming the Traffic Accident Research Team in 1970 to research on how to design safer automobiles.

Analysis: Volvo before and after its acquisition by Geely

Earlier this month in Beijing Volvo China held a conference in which Yi Han, vice president of China sales, reaffirmed the company’s commitment to innovation. In addition to promising deathproof cars by 2020, Mr. Yi also announced that Volvo China’s leadership team would be comprised of 35% women. He also promised that Volvo would sell one million vehicles and reach its carbon neutral targets by 2025. 

Analysis: Volvo before and after its acquisition by Geely

Volvo has also announced that it will be redesigning its products using newly developed platforms like the highly praised, award-winning Scalable Product Architecture, which underpins the XC90, and the Compact Modular Architecture, which will be featured in the upcoming S40 and XC40, which are both scheduled to debut next year.

Volvo has set up a very clear plan for its product lineup, with each vehicle being clearly marked according to its class and specification.

Analysis: Volvo before and after its acquisition by Geely

It is clear that after Geely’s acquisition Volvo has made some notable changes. However, it hasn’t been especially easy for Geely to come up with a way to raise Volvo’s prestige in China to match German brands like Audi and BMW. Managing development plans for both the Volvo brand and its own has proven to be quite a delicate balancing act for Geely. At the same time, Volvo’s own ambition is very clear, and how much control Geely has over them is also a question that many in the industry are left pondering about.

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