Volvo: Sure, Geely Will Keep Production in Europe ...

We've been keeping a close eye on the evolving Ford/Volvo/Geely saga. So far, the biggest point of contention in the brou-ha-ha has been Ford's concerns about intellectual property, which Geely might or might not respect after the ink dries. (China hasn't exactly been at the forefront of IP law.)

However, there have also been unspoken worries about the shift in production that could result from such a deal, moving factories and jobs from Europe to the Far East. Geely tried to quell some of those concerns by saying that it intends to keep Volvo's production in Europe -- if the sale goes through, of course -- but there's also talk of a new, 300,000-capacity plant in China. Awkward. [Reuters via egmCarTech]

Comments

[bittersweetbubbles]

Its not in Geely's interest to move the high brand value of European made Volvos to Asia, and at the same time lower the brand value. The Swedish and Belgian workers are also highly skilled and fast, no need to waste that. But it would be hard for Europe to produce a million cars, so more production capacity will be needed.
One could expect a midrange brand rolling out of Asian factories and the exclusiveness coming from Europe.
I have lived quite some time in Taiwan and there the Volvo is a well received and loved car - for its security and perceived value. If Geely start producing in mainland China, they will loose this market. Taiwanese people don't trust it if its made in China.
And mainland Chinese also highly value brands for being real.

Geely will also be a good owner for Volvo, directly situated in the Chinese market, has senior management from the US (how good is that?) and international support. At least this Swede thinks so.

Geely is traded in Hongkong, symbol 0175.hk, I have been long on it since the summer. I am not pumping stock here, no need since Wall street journal does a better job.
But go and buy it, the P/E is still below 20 - probably not for long. In my opinion Geely is a serious long term contender for stock in chinese cars - with or without volvo.

2009 Nov 21 08:34 AM

[sethmcs]

Buying Volvo was stupid for Ford. Selling Volvo is smart for Ford. So what does buying Volvo make Geely? Smart or stupid?

2009 Nov 22 06:28 PM

[bittersweetbubbles]

Geely is taking a risk, but buying Volvo will give them rights to use the technology from Volvo and this will put them in a different league with their own car development. Makes Geely smart.
Having to take care of Volvo as it is, might make Geely stupid.
However, during the weekend, a Swedish newspaper di.se reported that the Consortium Jakob is about to make a bid.

2009 Nov 23 03:17 AM

[bittersweetbubbles]

Correction. Crown is about to make a bid.

2009 Nov 23 03:42 AM

[mynine14]

Geely is no fool. They are not buying for Volvo; they are buying for the advanced vehicle technology. They will run with the brand as long as the sales support this. The reality is Geely is Chinese... Do you expect them to maintain the development, design, and manufacturing in Goteborg?

Tarnishing a brand is of little interest to the parties making these lux brand acquisitions. If this were the case Tata would not have made their purchases.

2009 Nov 23 12:22 PM

[bittersweetbubbles]

I expect Geely to what is good for business. I am long in them, remember?
Any buyer would maintain the development, design, and manufacturing in Goteborg, as long as it gives sales and profits.
So I guess we agree there, but I don't understand what "The reality is Geely is Chinese..." adds to the business equation?
Would it make them more or less as business people?

On Nov 23 12:22 PM mynine14 wrote:

> Geely is no fool. They are not buying for Volvo; they are buying
> for the advanced vehicle technology. They will run with the brand
> as long as the sales support this. The reality is Geely is Chinese...
> Do you expect them to maintain the development, design, and manufacturing
> in Goteborg?
>
> Tarnishing a brand is of little interest to the parties making these
> lux brand acquisitions. If this were the case Tata would not have
> made their purchases.

2009 Nov 23 05:08 PM

[sethmcs]

Geely buying advanced technology? Ever hear of reverse engineering. In my opinion the Chinese are very good at it. Consider how good Chysler did with "advanced" German engineering. Car mergers never seem to work out since the formation of GM.

2009 Nov 24 12:03 AM