Apr 16, 2010

World Car Manufacturing--Ford, Geely, Volvo

Let's talk....interesting news in world car manufacturing....according to Yahoo.com, Geely Automobile (China) purchased Volvo cars (Sweden) from Ford Motor Company (USA) for $ 1.8 billion on March 28th, 2010. Is this a good thing? Let's take a look....


Ford Motor Company (USA) http://www.ford.com/ --This is a WIN for Ford and a good strategic move. Ford was never able to incorporate Volvo into their lineup. They had too many brands to contend with and the strategic focus was clouded. Ford can now concentrate on what they do best, marketing the Ford and Lincoln Mercury brands. Ford Motor Company bought Volvo for $ 6.45 bn in 1999 and sold it for $ 1.8 bn in 2010. Ford indicated they would be receiving less cash than the $ 1.8 bn due to settlements at closing. Ford took a real loss on this brand....it was never profitable for them.

Geely Automobile (China) http://www.geely.com/english/ --This is a WIN for Geely and a good strategic move. Not only did Geely purchase Volvo cars at a good price, but they now own all of Volvo and its assets. This link is a short video on the Volvo C30 electric car. http://www.topgearrules.org/new-volvo-c30-electric-car-2010.html Purchasing Volvo cars has real marketing benefits for Geely. Volvo is a niche marketer that built its reputation on quality, safety and durability. The Swedes have produced a good product over the years. This purchase includes a complete luxury car manufacturing platform and advanced technology, this alone jettisons Geely onto the world luxury car manufacturing stage.

The parent company of Geely Automobile is Zhejiang Geely Holding Group Co., Ltd. http://www.geely.com/english/ . As noted on the website, Zhejiang Geely Holding Group Co., Ltd. is headquartered in Hangzhou, China and has six manufacturing bases for vehicles and power assemblies located in Linhai, Ningbo and Luqiao in Zhejiang Province, and Shanghai, Lanzhou and Xiangtan. Current annual manufacturing capacity is a total of 300,000 complete vehicles and 300,000 engines and transmissions.

Volvo cars (Sweden) http://www.volvocars.com/ --The transaction between Ford Motor Company and Geely Automobile has varied effects on Volvo. This is a short term WIN for Volvo cars (Sweden). Volvo will be given center stage at Geely and the attention it deserves. However, this is a long term LOSS for Volvo cars (Sweden). The long term prediction is that Geely will fully absorb Volvo cars and assert majority control over the brand. Overall, the risk of the venture appears to be on the Swedes' shoulders.

Buying companies to gain a foothold in a new market is not a new strategy. What is "new" is that China is using this tactic across ten strategic industries, providing quick access to numerous new markets, improving competitiveness and gaining advanced technology. According to http://www.chinadaily.com.cn/ on August 13, 2009, the ten strategic industries identified in 2009 are: steel, automotive, shipbuilding, chemical, light industry, textiles, nonferrous metals, equipment manufacturing, electronic information and modern logistics. According to the FT.com on March 28, 2010, the purchase of Volvo cars by Geely Automotive was financed by Chinese state institutions and local provinces.

Copyright 2010 Go-Market, Inc.

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