Tensions end as Volvo finds stability with Geely

Financial Times - When Volvo Cars was acquired by Geely of China last year, there was nervousness about what the deal would mean for the Swedish car industry.

A year on, it is hard to find anyone in Sweden with a bad word to say about the new Chinese owners. Volvo announced in March that it planned to hire up to 1,200 workers in Sweden and Belgium, allaying fears that Geely would shift jobs to China.

Most of the recruits will be engineers in Volvo's home city of Gothenburg, indicating that, while Geely has ambitious plans for Chinese production, most development work will remain in Europe. "So far, they've done everything they said they were going to do," says Aleksandar Zuza, an industry analyst at IF Metall, the main Swedish car workers' union. Suppliers are also pleased with the stability brought by Geely after uncertainty when Volvo was a struggling subsidiary of Ford, the US carmaker.

Some Swedish suppliers are eyeing opportunities to follow their customer into the Chinese market. "It is very clear Volvo needs western suppliers to help support its expansion in China," says Svenåke Berglie, head of FKG, the trade organisation for Swedish car parts makers.

For Volvo managers, there were some initial tensions when the group's traditional focus on safety and energy efficiency jarred with Geely's desire to make bigger, more luxurious cars.

However, Li Shufu, Geely chairman, told the Financial Times that those disagreements had been resolved and pointed to the stylish Volvo prototype unveiled at last week's Shanghai Auto show as "the result of a consensus". Volvo is run as a standalone company with its own board and mainly Swedish management. Unions say this is an improvement from US ownership when Volvo was a small, oft-neglected part of Ford.

Saab, Sweden's other global car brand, is facing a renewed liquidity crisis a year after being sold by General Motors of the US to Spyker Cars of the Netherlands.

Spyker is seeking fresh funding from a Russian investor but, based on Volvo's experience, many Swedes would prefer to see a Chinese white knight ride to the rescue.