Volvo and Geely

Volvo and Geely

1

Chinese Automobile Industry

2

• Cental Goverment, Local Goverment, Automaker

Three Main Player in the Industry

• Production of 13.8 mill units 2009 China exceeded Japan as leading car producer in 2009

• Joint Venture Foreign Firm and Chinese Firms Characterizing

• Less than 5 out of 1000 people own a car

Growth potential

• Growth peak in 2015 Projected sales growth at 1mill vehicles annually

• Shanghai, Tianjin, Gaungzhou 3 Main car manufacturing cities

Li Shi Fu & Geely Automotive

3

• Born 1963 in zhejiang province • Founder of the Geely Holding Group • His first business was photo services for tourist at

tourist site, for which he used camera and bicycle purchase with RMB 100 school graduation gift.

• In 1997, he entered the automobile manufacturing industry and has been devoted to the development of China's auto industry over the past two decades.

“Nothing is possible, one only needed to

dream big.”

1980 1990 2000 2005 2010

1986 Geely founded on Nov. 6 as a refrigerator maker

1998 The Geely Hoaqing SRV rolled off the production line

2001 1st private company authorized to produce in china 2003 Exported its 1st car

2005 Listed in HK Stock Market 2007 Joint venture with Manganese Bronze holding, makers of london taxi. Geely own 52% stake in shanghai LTI automobile Ltd.

2008 Participate the north USA auto show. Aquisition of australian drivetrain system

• Volvo Founded in Gothenburg, Sweden, in 1927

• Over next 70 years volvo cars became known for quality, safety and somewhat quickly swedish style

• 1990s volvo had added concern for environment as a core brand value

• “It might be because the car is a little square and sluggish just like the swedes themselves “ (the Volvo Way)

• “Cars are driven by people. The guiding principle behind everything we make at Volvo, therefore, is – and must remain – safety” (Assar Gabrielsson and Gustaf Larson, founders of Volvo)

4

THE FORD ERA

• Ford Purchase Volvo Car from the Volvo Group in 1999 for $ 6.45 Billion. Volvo Truck and Commercial Vehicles were not part of the deal.

• Volvo Car was part of formation Premier Auto Group (PAG), a division focuses High End Product

• Volvo Suffered losses under Ford in 2006 and 2008-2009 recession

Volvo Background

Volvo Performance

Performance 2006 2007 2008 2009 2010

Revenue (SEK Million) 122.076 121.620 95.120 95.700 113.100

EBIT (SEK Million) (296) (1.117) (5.185) (5.185) 2.340

Sales (Number of Cars) 427.747 458.323 334.808 334.808 373.525

Employees 25.553 24.384 19.650 19.650 19.494

Fleet avg CO2 g/km 193 190 173 173 157

5

300,000

330,000

360,000

390,000

420,000

450,000

480,000

2006 2007 2008 2009 2010

SA

LE

S

VOLVO GLOBAL SALES VOLUME

The Deal

2002

(Mr. Li interest in

Volvo)

2007

(Rothschild Invesment

Bank approached

Mr. Li about a acquisition)

2008-2009

(Financial Crisis, Ford entertained

Mr. Li’s advances)

April 2009

(Four different Automobile Companies toured to Europe)

6

Dong Feng Chang’an

Chery Geely Holding

The Deal

Dec 2009

The late spring and summer of

2010

August 1, 2010

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$1,8 billion: $1,6 billion in cash and $200

million note

Further Negotiations

$1,5 billion: $1,3 billion in cash and $200

million note

DOWNWARD

Working Capital & Labor

and Pension Fund

?

1999,

Ford bought Volvo

6,45 Billion =

3 X more than the

current bid price made

by Geely

The Effect of Acquisition For Geely & Ford

8

Geely stock rose 5.9 percent Monday in

Hong Kong

Ford shares gained 39 cents, or 3

percent, to close at $13.16 in New York.

Geely’s Acquisition

of Volvo

Geely Holdings & Geely Auto

Alternatives & Solutions

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Others 10%

North America

15%

Far East 10%

Europe 65%

Volvo Sales 2010

1 • Expand in North America

2 • Expand in China

3 • Expand in the Far East

VO

LVO

• Back to Luxury segment

GE

ELY

• Technology transfer, increase quality

The New Strategy – China Expansion

Global sales to

800.000 by 2020

Issues: • Future of the Volvo Brand • The integration between the European and Chinese organizations • The relationship between the China-based Geely automobile business and the global Volvo compane

Create Volvo Cars China

Set up DCC*

Build a plant in Chengdu

Build a plant in Daqing

*DCC: Dialogue and Cooperation Commitee 11

• The expansion in China will not affect operations and employment in Europe.

• Shanghai will serve as Volvo Car China headquarters and centre for product development, design and sourcing. To support Volvo Corporation R&D in Sweden regarding the development of electric vehicles and hybrids.

• Focus on increasing sales in China and expanding dealer shops.

• Volvo Car Corporation will optimize its sourcing network in China for the global market.

• Volvo Car China will start to employ new staff to work with product development for the Chinese market and support local production and purchasing.

“Geely is Geely and Volvo is Volvo.”

-Li Shu Fu

What happens next?

12

While the carmaker’s global deliveries rose 9 percent last year to almost 466,000, largely thanks to China, U.S. sales fell another 8 percent to 56,000 vehicles. http://fortune.com/2015/03/30/volvo-factory-us/

Volvo Cars will invest $500 million in its first U.S. assembly plant under plans announced Monday, plugging a long-standing gap in the Swedish carmaker’s manufacturing base as it pursues a global comeback under Chinese ownership. http://fortune.com/2015/03/30/volvo-cars-to-build-u-s-plant-to-spearhead-sales-recovery/

Geely-owned GELYY -1.00% carmaker Volvo Car Group said its 2014 operating profit rose 17.5% in its best year of sales to date as rapid expansion in China and recovery in Europe took the sting off lingering weakness for the brand in the United States. The Gothenburg-based company, bought by China’s Zhejiang Geely Holding Group Co. from Ford Motor Co. F -1.55% in 2010, said full-year operating earnings rose to 2.25 billion Swedish crowns ($302.00 million) from 1.92 billion in the previous year. Samuelsson said he expected the European market to grow at roughly the same pace in 2015 as in 2014, when sales expanded around 5%, while the slowing economy in China dampened premium market growth there to around 10%. http://fortune.com/2015/02/26/volvo-posts-record-sales-as-china-growth-offsets-u-s-weakness/

Volvo XC90 (2015) for US Market

Volvo global sales 2014: 466.000, rose 9% because of a significant increase in

China

Operating profit in 2014 rose 17.5%

In Feb. ‘15 announce they will invest $ 500 miollion in its first US assembly

plant

'Hi, we're Volvo. Remember us?‘ With the revamped XC90 getting ready to hit U.S. dealerships this summer, the Swedish automaker is using guerrilla tactics to reintroduce itself to the U.S. http://fortune.com/2015/02/20/volvo-xc90-2/

http://www.forbes.com/sites/russellflannery/2014/10/27/geely-in-swedish/2/

http://fortune.com/company/gelyy/



http://fortune.com/company/f/



Lessons Learned

1. Never underestimate the power of Chinese Company.

2. Image in luxury brand is everything.

3. China is a very big market with a fast growing luxury segment.

4. In organizing two distinct organizational culture, the cautious way is the best. (Volvo-Geely, Renault-Nissan).

5. Acquisition is one of the best way to capture technology prowess.

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Thank You

Once this tiger returns to the mountains and carves out its own territory, it will

enjoy the market share that it is due.” -Li Shu Fu

http://www.quotetimes.com/people/110091/li-shufu?feedid=726354

“

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Geely Automobile In Figures

Year Started 1998

Total Workforce 15.248 (10% R&D Staff)

Customer Base Diversified & Fragmented

Manufacturing Facilities 8 Car plants, 2 Engines plans and 2 Gearbox plants

Product 7 major sedan models under 4 platforms

Number of Dealers 800

Brand Free Cruiser, Geely Kingkong, Vision, Geely Panda

Sales volume 2010 415.000 Vehicles

Five Key Brand Group Geely, Gleagle, Emgrand, Englon

Distributor Network 300 dealers in 45 countries

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Product Geely

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Changing Chinese Purchasing Priorities

Reason to Buy (% response) 2000 2010 Change

Low Purhcase Price 28% 12% -16%

Good Vehicle Quality 5% 9% 4%

Good Vehicle Styling 3% 19% 16%

Roominess/Interior Space 2% 10% 8%

Average Transaction Price (RMB)

Premium Midsize 341.534 209.802 -39%

Midsize 175.793 120.234 -32%

Entry Midsize 134.964 90.737 -33%

Compact 63.980 42.988 -33%

Average Exchange Rate (RMB/USD) 8,28 6,77

Average Transaction Price (USD)

Premium Midsize $ 41.248 $ 30.990 -25%

Midsize $ 21.231 $ 17.760 -16%

Entry Midsize $ 16.300 $ 13.403 -18%

Compact $ 7.727 $ 6.350 -18% 17

Volvo Innovations

• Liminated glass (1944)

• The 3-Point Safety belt (1959)

• The rear-facing child seat (1964)

• The side impact Protection system (SIPS, 1991)

• Side Safety Airbags (1995)

• Head Protecting airbags(1998)

• BLIS (2004)

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Model range - Production

Volvo S40

2010: 28.666 Assembly: Ghent

Volvo S60


Volvo S80

2010: 28.949 Assembly: Gothenburg

Volvo V50


Volvo V70


Volvo C70

2010: 9.532 Assembly: Uddevalla

Volvo C30


Volvo XC90


Volvo XC70


Volvo XC60


Incl. assembly in China (S40/S80L), Thailand (S80, XC90) and Maleisia (S40, S80,V50,XC60,XC90). Total VCC-production 2010: 387.802 cars

Volvo V60


Competitive Strategy

Volvo Acquisition

• Biggest overseas acquisition by a Chinese automaker

• 100% ownership of Volvo and related assets, including agreements on intellectual property rights, supply and R&D arrangements

• Planned production 300 000 Volvo’s annually

• Double original Volvo production capacity

• Mainstream European brand vs domestic economy car brand

• Building a successful partnership between Volvo and Geely will require a solid plan for post-acquisition integration

Geely Competitors & Suppliers

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Main:

•China Motor Corporation

• Dragon Hill Wuling Automobile

Holdings Limited

• Brilliance China Automotive

Holdings Limited

• Zhejiang Geely Automobile

Parts & Components Company

Limited

• Shanghai Maple Engine

Company Limited

• IAC Group (Interiors)

• Autoliv Inc (Airbags)

Competitors Suppliers

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Chinese Initial Quality Survey

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Business

Volvo and Geely