The Global Auto Forum 2013: Let Volvo Be Volvo

Volvo+Ironmark+LogoThe fourth annual Global Auto Forum (“GAF”) was held in Wuhan last week, and by all measures, it was the most successful ever. Building upon the success of the first three conferences, all of which were held in Chengdu, the GAF has become the leading automotive conference in China. Over 1,000 representatives from the Chinese and global automotive industry and the Chinese and international media attended this year’s event.

The timing for GAF 2013 was particularly propitious. It has been exactly 60 years since Chairman Mao Zedong sat down and wrote the logo for China’s first automotive manufacturer, the aptly named “First Automotive Works.” Also, it has been almost thirty years since “Beijing Jeep,” the joint venture between Beijing Automobile Industry Corporation and tiny American Motors was formed. Beijing Jeep was the first Sino-Foreign joint venture in China’s automobile industry. The company’s early troubles inspired James Mann to write Beijing Jeep, the first book about doing business in China. From its humble beginnings at First Auto Works and Beijing Jeep, China has developed into the largest automotive market in the world. The industry’s development over the past thirty years has literally transformed the country.

John McElroy, the popular host of Detroit’s Autoline This Week television show was among the many representatives of the media who attended GAF 2013. McElroy’s show is a half-hour program featuring top automotive executives and journalists. Also in attendance was John Lauri, a film director who is making a very interesting movie about women in the automotive industry. Sirens of Chrome is due to be released in 2014 and will include many scenes from China. The film’s storyline will revolve around the “enduring allure of auto show models.”

Ironically, the featured speakers at GAF 2013 were Alan Mulally, President and Chief Executive Officer of the Ford Motor Company, and Li Shufu, Chairman of both Zhejiang Geely Holding Group Co., Ltd (“Geely”) and Volvo Car Group. In 2010, Geely signed a deal worth US$ 1.8 billion to purchase Volvo from Ford. Geely’s acquisition of Volvo was the largest foreign purchase by a Chinese car manufacturer, and is being watched closely by industry observers to determine whether such large cross border deals will become commonplace in the future development of China’s auto industry.

In his remarks, Chairman Li spent most of the time talking about Volvo. Ever since Geely acquired the Swedish car maker, there has been a great deal of speculation about how the integration process has been going. By all accounts, Geely has been taking a hands-off approach with respect to Volvo, and this was confirmed by Chairman Li’s comments.

Chairman Li emphasized that Volvo and Geely are separate companies with very different products. Geely’s cars are for the masses, while Volvo is a luxury brand. Chairman Li also stressed how much attention Volvo pays to driver and passenger comfort in areas such as the car’s internal air system. He joked that when a Chinese consumer opens the door of a Volvo, the air that he breathes makes him think that he is in Beijing. When he closes the door, however, he thinks that he is in Northern Europe!

Organizationally, Chairman Li said that, while he is Chairman of both Geely and Volvo, the companies operate independently. As he put it, “Geely and Volvo are brothers, not father and son.” That has not prevented Chairman Li from using his influence to help Volvo to penetrate the China market. While only 43,380 Volvo’s have been sold in China so far this year, that is due to change soon. A new Volvo plant in Chengdu is more or less completed, and a second assembly plant in Daqing in the far north of China in Heilongjiang Province is due to come online in late 2014.

Knowledgeable industry insiders at GAF 2013 tend to agree that the integration process is going well. By letting “Volvo be Volvo,” Geely is using the same approach that Tata, the large Indian vehicle manufacturer, is using with Jaguar and Land Rover, two brands that it also bought from Ford. While Jaguar and Land Rover lost a lot of their luster under Ford’s stewardship, both seem to be thriving as part of Tata.

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