Geely Merges Volvo Essay

2430 Words Nov 22nd, 2011 10 Pages
Introduction
After a one-year long and difficult negotiation, on March28 2010, the China Geely Group went where no Chinese auto firm has gone before, buying a luxury car brand, Volvo, for $1.8billion from Ford, including the 100% shareholder and the relevant assets. It was China's largest overseas automotive industry acquisition, which was also the first wholly-owned merger. Besides, it was the first time for a Chinese own brand to merge a luxury brand. This deal proved to be a most ambitious action for the Chinese automaker’s desire to transform itself into an international auto player and wrote a new chapter for the Chinese automotive industry.

The deal was greeted with cautious optimism by some experts, saying the move offered a
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Thirdly, some financial support given to Geely by the government which was also the direct help. Geely smoothly secured $2.1 billion of loans from Bank of China, China Construction Bank and Export-Import Bank of China. It can be said that the government’s support is one of the most powerful motivators for Geely’s merger.

Geely’s unique advantages comparing with other competitors
In the negotiation, Geely promised to satisfy all the operational requirements of Ford and Volvo, such as, remaining the independent operation system, non-interference of Volvo’s operational management and promising not to transfer the factory and layoffs. All these respects gained the affection of Ford and played an invaluable rule in the acquisition.

Ford and Volvo shared a lot of classified technologies and patents, therefore Ford didn’t want to sell Volvo to their competitors, while Geely was no threat to Ford at all. This might cause Ford to think more favourably about Geely.

Unlike other corporations in foreign countries, Geely relied on the Chinese market which would be more attractive. No matter what car brands, if they seeked for a growth, China was the first choice, and it was not exceptional for Volvo. Joint adventures with Geely in China, Volvo may gain a better development.

Geely’s long-term preparation
Geely had been preparing for 8 years in terms of capital, technology and negotiation team. In this period, Geely had practiced twice. In

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