The tough course of acquisition
　　　
　　Li Shufu, Chairman of the Geely Holding Group, briefed Geely’s initial growth path as “in 1993, we wanted to produce cars; in 1994, we began manufacturing motorcycles; three years later, we set out on our car dream; and in 1998, we launched our first car.”
　　
　　Geely has had a long-standing passion for Volvo. As early as 2002 when Geely obtained its car production license, Li said within the company that Geely would buy Volvo - the safest car in the world. However, no one took his words seriously.
　　
　　Geely was playing the “cheap card” in the early days, focusing on low-end markets. In order to shake off the low-price and low-end brand image, Geely initiated a strategic transformation in May 2007, and bought the Manganese Bronze Holdings Plc and Australian DSI in preparation for the acquisition of Volvo.
　　
　　The battle for acquisition officially commenced in January 2008. Geely created a special acquisition project team, which carried out the work in three areas: (1) to make an in-depth and comprehensive study of the target company; (2) to make general acquisition strategies; and (3) to formulate a detailed acquisition schedule. The team spent one year preparing the first acquisition proposal and presented it to the Ford Motor Company in 2008, essential for later negotiations.
　　
　　Initially, Geely, through a U.S. consulting firm, delivered its intention to buy Volvo, and Li Shufu paid a visit to Ford. However, throughout 2008, Ford rejected their proposals. Ford had its own worries, the biggest being IP entanglements, because in its eyes China was ineffective in IP protection. Ford had many cross technologies with Volvo, and it also enjoyed a large market share in China. Any improper use of its technologies by any Chinese buyer would impair its competitiveness in the Chinese market.
　　
　　Eventually, Geely’s operation plan for Volvo convinced Ford that the Chinese market could turnaround Volvo’s financial woes. In due course, Geely’s business background and acumen created a belief in Ford that the company would lay high emphasis on IP protection. “In 2003, we won the trademark infringement lawsuit against Toyota, and then we renounced the use of that thorn trademark and designed a new one. This has left a very good impression to Ford,” said Li.
　　
　　The negotiations heated up in 2009. In January, Li Shufu led a delegation to meet with Ford’s top management. Thereafter, Geely received an official invitation letter from Ford to bid for Volvo. On March 12, Geely tendered the first offer followed by four-months of due diligence.
　　
　　After the period of due diligence, Geely presented the second legally binding bidding document on July 30, 2009, which reassured Ford that Geely would protect the IP of Volvo’s technologies.
　　
　　On October 28, Ford picked Geely as its preferred bidder for Volvo.
　　
　　On December 23, 2009, Ford Motor declared that it had reached a tentative agreement with the Geely Holding Group for the sale of the Volvo Car Corp, and the final agreement was expected to be signed in the first quarter of 2010. According to the agreement, Ford had agreed with Geely on substantive commercial terms including the investment plan, operation management, intellectual property and payment terms. Ford also expressed its willingness to transfer IPRs to Geely, and continue the cooperation with Volvo.
　　
　　In retrospect of the entire negotiation process, Li told the media, “IP negotiation was a very tough part. Now that we paid such an enormous amount, we wanted a world-leading company with a solid IP basis. Otherwise, what we got would be just a wet noodle.”
　　
　　Special concerns about IPRs
　　
　　Geely’s successful takeover of Volvo received universal praise. Overseas acquisition expert Ma Guangyuan said: “China has become the biggest automaker and auto seller in the world. Last year, Sichuan Tengzhong Heavy Industrial Machinery’s attempting purchase of Hummer brand (denied by Chinese regulatory agencies) and the Beijing Automotive Industry Corp.’ buying of Saab’s powertrain technology both caught the world’s eyes, and filled them with great expectation of the restructuring of the world’s auto industry by the Chinese auto industry. However, the real landmark is Geely’s purchase of Volvo. In comparison, others are seemingly not so important.”
　　
　　Jia Xingguang, an auto industry analyst, said earlier in an interview with Nan Fang Daily that the purchase was a big step out for the Chinese auto industry going overseas. He is positive about Volvo’s future, “Geely values Volvo’s technologies of safety and environmental protection and that’s strategic.” Zhang Xiaoyu, president of the Society of Automotive Engineers (SAE) of China agreed with Jia about the strategic turning point: “We have been used to the entries of foreign brands into the Chinese market. Now it’s time for our brands to start going overseas.”
　　
　　The acquisition left the market with a prominent concern: would Geely own all of Volvo’s IPRs? When reporting the event, major news media kept asking a question: “What has Geely bought for USD1.8b?”
　　
　　According to the stock acquisition agreement, Geely acquires a 100 percent stake in the Volvo Car Corporation and related assets (including IPRs). What are the assets and IPRs? Relative to the IPR platform, the power assembly, safety and environment protection technology are shared by Ford and Volvo. Will Geely have ownership or simply the right of use?
　　
　　Besides stock acquisition, the agreement also covers important clauses including IP, spare parts supply and R&D in the Volvo Car Corporation, the Geely Holding Group and Ford Motor. Under these clauses, the Volvo Car Corporation will operate independently under the ownership of Geely and continue to implement the established business plans and the sustainable development strategies.
　　
　　At the press conference after signing the deal, Zhao Fuquan, vice president of Geely gave a detailed explanation of the IPRs Geely purchased, which involved three aspects: First, there is neither equity participation between Geely and Volvo, nor equal stock ownership, other than the 100% stock transfer. This is the core of the IP negotiation. Second, Volvo, as an independent company, will retain the ownership of its key technologies and IPRs to guarantee the sustainability of its world-leading premium brand. In the meantime, they have the right to use all the IPRs associated with Ford needed for the implementation of the established strategies and business plans. Third, as the sole shareholder of Volvo, Geely will have the ownership of Volvo’s key technologies and IPRs, and the right to use the bulk of its IPRs, including the zero casualty and zero pollution technology and the new energy technology.
　　
　　As Li Shufu said: “We are fastidious and Ford is generous about IPRs. The marriage between Geely and Volvo will lead to a win-win consequence.”
　　
　　How to implement the brand strategy

　　For a long time, the difficulty that has been obsessing private-run auto enterprises in China is how to upgrade China’s self-owned car brands.
　　
　　Ma Guangyuan said that self-owned brand, core technology and spare parts had long been depicted as Chinese auto industry’s most vulnerable points. Geely aimed to take advantage of Volvo’s strong R&D power to fuel the Chinese auto industry with more technical contents and to build up a more globally competitive self-owned brand. Signing the deal was only the first step for Geely. Integration of this world-leading brand and technology was still a long way off.

　　Alan Mulally, Ford’s President and CEO, said: “Volvo is a great brand with an excellent product line-up. This agreement provides a solid foundation for Volvo to continue to build its business under Geely's ownership.”
　　
　　Li Shufu specially positioned Volvo’s brand value as, “We will turn Volvo Car Corporation into a world-leading premium carmaker with formidable vitality and competitive strength. I always say that Geely is Geely, and Volvo is Volvo. Volvo is a Swedish business with a strong Scandinavian heritage. Sweden has the soil where it grows up and succeeds. After the takeover, Volvo will keep its unique characteristics.” Li added: “This transaction will ensure Volvo’s continued leadership in the premium segment, where it enjoys a global reputation for safety and environmental-friendly technologies. This famous Swedish premium brand will remain true to its core values of safety, quality, environmental care and modern Scandinavian design. Geely will not produce Volvo, and Volvo will not produce Geely either.”
　　
　　At present, there are two enterprises using the Volvo brand. One is the Renault-owned AB Volvo, which produces commercial utility vehicles. The other is the Volvo Car Corporation, which was sold to Ford Motor Company in 1999 for USD 6.4 billion. And now Geely is the sole controller of Volvo Car Corporation. It will put a clear demarcation line between its self-owned brand and the Volvo brand, enabling them to operate independently and to avoid mutual interference.
　　
　　It is known that the most severe problem facing Volvo is its scale is too small, but its input in R&D is almost the same as that of Mercedes-Benz and BMW. Therefore, the substantial accumulation of technology and IPRs in Volvo’s 50-year-history has become a great resource pool for Geely. After the takeover, Geely, with an aim to improve its R&D power and brand value, will seek more chances of strategic cooperation between the two companies.
　　
　　Geely has a development blueprint of Volvo: to continuously promote Volvo’s business in more than 100 countries worldwide with a focus on the soaring Chinese market. “As the world-leading premium brand, Volvo is bound to embrace a huge market potential in the promising Chinese market,” said Li Shufu with full confidence.