Text A Is Volvo Swedish, American or Chinese?
In 1924, Assar Gabrielsson, a sales manager and Gustav Larson, an engineer, had the idea to build cars that people could drive on Sweden’s rough roads and during Sweden’s severe winters. Three years later, the first V olvo car was manufactured. This Swedish company quickly became a well-known producer of cars and commercial vehicles, including buses, trucks and heavy construction machinery.
By 1945 V olvo had become well-known outside Sweden, but they were too expensive for most people. 54 years later, in 1999, V olvo sold the car manufacturing part of its company to Ford Motor Company, America, for $6.45 billion. Ford thought it would make a big profit from this deal, but it did not. So only 11 years later it sold V olvo Cars to the Chinese motor manufacturer, Geely Automobile.
For V olvo, manufacturing cars in China seemed essential as it wanted to increase its glob
al yearly sales to 800,000 cars by 2020. However, under China’s regulations, foreign car manufacturers can only produce cars in China when the company is jointly owned and run by a Chinese company. Thus the deal was made with Geely.
The Hangzhou-based company not only paid Ford $1.8 billion, but also invested another $900 million in the production of Volvo. It promised to change V olvo from a company that was making a loss to a company that would make a profit.
According to their plan, Geely will use V olvo’s technology in its vehicles and build a factory that can produce 300,000 cars per year. However, there are some difficulties. Firstly, Geely does not have the know-how to manage a large company like V olvo. Last year Geely only had a turnover of $2.4 billion, whereas V olvo’s turnover was $12.4 billion.
Secondly, Geely only exports a small number of cars to other developing countries, so it is not known as a global player. Thirdly, reducing costs and keeping the standards will not be easy.
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China is the world’s largest automobile market with sales of 16 million in 2010. Geely plans to sell between 200,000 and 300,000 V olvo cars per year. This is a very optimistic plan as only 30,000 V olvos were sold in China in 2009.
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