At the end of last year, Volvo was officially listed, and the company closed with a corresponding market capitalization of about SEK 195.8 billion (about $22.08 billion). Looking back on the 10 years since Geely acquired Volvo, it is actually a microcosm of China's automobile industry from small to large, from large to strong.
With a small bo big "snake swallowing elephant"
At the beginning, Geely's acquisition of Volvo was generally not optimistic, not only netizens, but also industry insiders, for two reasons.
On the one hand, the original Geely was too weak, only 13 years of car manufacturing, the production of low-end models, and Volvo has a history of nearly a hundred years, the brand value of nearly ten billion US dollars. In 2007, Geely's annual revenue was only 10 billion yuan, while Volvo's revenue in 2007 was 10.6 billion US dollars. No matter how you look at it, these two car companies are not one size.
On the other hand, most of the funds for Geely's acquisition of Volvo came from leverage, the acquisition plus the operation of 2.7 billion US dollars, domestic and overseas financing accounted for half, once Geely's acquisition of Volvo did not achieve the expected effect, heavy debt, will crush Geely.
But Geely is still broken, the acquisition of Volvo, Li Shufu can be said to be the best of the crowd, from this point can be seen, Li Shufu is definitely an entrepreneur with advanced vision and strategic thinking, Geely not only gambled, but also won the bet.
Most of the acquisition funds come from leverage
At that time, Ford was actually selling Volvo at a loss, because in 1999, Ford spent $6.5 billion to buy Volvo, but due to the financial crisis, from 2007 to 2008, Ford lost a total of $15 billion; the debt was as high as $26 billion. Ford's Aston. Martin, Land Rover and Jaguar were sold, and Volvo also suffered a sharp loss, with Volvo's pre-tax loss reaching $1.69 billion in 2008. In such a situation, Ford could only endure the pain of love, when Ford's offer was $6 billion, but under the valuation proposal of Lowhill, the acquisition price was successfully compressed by Geely to $1.8 billion, plus $900 million of follow-up operating funds, a total of $2.7 billion, the acquisition of 100% equity of Volvo Cars in Sweden, including 9 series of products, 3 new platforms, more than 2400 global networks, talents and brands, and important supplier systems.
Li Shufu is definitely a master of playing leverage, in the acquisition process, Geely's own funds accounted for only 25% of the total acquisition funds. Beginning in 2011, Geely has transfused $11 billion to Volvo, mainly for the development of new SPA platforms and the establishment of factories in China. Of these, 7 billion yuan came from the local government financing platforms of Chengdu, Daqing and Shanghai Jiading. Shanghai and Daqing city are directly invested in shares through the state-owned assets platform, and none of them have entered the equity, but through the government's guarantee loan to Geely, as a condition and return for the transaction, Geely needs to coordinate the Volvo brand to establish production bases in Jiading, Daqing and Chengdu, Shanghai. In the subsequent working capital, Geely once again obtained a large amount of funds to revitalize the Volvo brand through leverage.
Can Geely use Volvo's technology?
After Geely's acquisition of Volvo, there have been divergent opinions about whether Geely Cars can use Volvo's technology. In fact, intellectual property negotiations are the core of this acquisition, and Geely can fully use Volvo's original technology, but because Ford acquired Volvo, many of Ford's and Volvo's technology are shared, and this part of the technology comes from Ford, so this part of the technology, Geely can not be used.
For example, engine products, volvo after being acquired by Ford, are using ford parent company engines, lack of their own engine products. However, fortunately, Volvo still has a certain technical accumulation, after Geely's acquisition of Volvo, Geely injected capital into Volvo to independently develop the Drive E series engine, and since then, as the main engine product for Volvo's models, in recent years, it has also begun to be installed on Geely models.
Volvo has always had a strong accumulation of technology in terms of active and passive security, which belongs to Volvo's own technology and can be completely used by Geely.
In the decade since Geely's acquisition of Volvo, the two sides have achieved a win-win situation, and Volvo's sales in the Chinese market have increased from about 30,000 vehicles in 2010 to 160,000 in 2020. In the global market, in 2020, Volvo Cars' global sales will be twice as high as it was a decade ago. Geely Automobile has also grown from a small factory that is shoddy and imitates cottages from the very beginning to a sales champion of its own brands, and its brands such as Lynk & Co and Extreme Kr have begun to explore the high-end of their own brands.
No matter how we feel about Geely, a domestic car brand, we have to admit that Geely's merger and acquisition of Volvo is very successful, and it is a huge milestone for the development of China's automobile industry, which is enough to enter the history of the development of China's automobile industry. This gamble of the century, Both Jili and Li Shufu won!