Will Volvo be sold in the next decade? | Geely-Volvo 'Fission'

A decade later, uncertainties have begun to emerge precisely in these four areas: once technology absorption is complete; when market expansion encounters upheaval; when financial pressure mounts; and when synergies give way to mutual interference—internal fissures begin to appear. Looking even further ahead, deep-seated cultural differences rooted in corporate and brand identities will ultimately become the source of such rifts—just as German-born Daimler could not truly harmonize with American Chrysler, and just as homegrown American Ford ultimately failed to successfully manage automotive brands from Sweden, Japan, and the UK, each bearing distinct cultural heritages. This seems to echo the old adage: 'After a long period of division, unification is inevitable; after a long period of unity, division is inevitable.' Recalling bygone days 'Its purpose in acquiring Volvo has already been achieved; Volvo will soon be reluctantly divested by Ford, and Ford will inevitably sell Volvo.' Over a decade ago, when journalists asked Li Shufu why he believed the acquisition of Volvo was feasible, Li Shufu responded thus. Indeed, behind every commercial move lies the driving force of interest. Whether to acquire or divest hinges not only on sentiment but also—more significantly—on commercial interests and value considerations. Especially amid today’s industry turbulence, mergers and splits occur constantly: Volkswagen and Ford have formed an alliance; Mercedes-Benz and BMW have joined hands for long-term collaboration on autonomous driving R&D; and FCA and PSA have swiftly merged. Yet even as consolidation unfolds, fragmentation proceeds in parallel: the Renault-Nissan Alliance fractured following Carlos Ghosn’s arrest, and under competitive pressure, Tata Group plans to seek partners for Jaguar Land Rover. For Li Shufu, having tasted the benefits of integration, he has consistently championed consolidation. Recall his 2018 acquisition of Daimler shares: in a signed article published in foreign media, Li stated, 'Automakers must cooperate—or risk being swallowed up: The industry must rethink new pathways for collaboration and innovation; virtually no company can go it alone.' Thus, in February this year, Geely and Volvo announced plans to form a new automotive group, continuing coordination in finance, procurement, and R&D—and accessing global capital markets via a listed entity. Meanwhile, Geely still needs to learn from Volvo: at the end of last year, Geely planned to restructure its powertrain business jointly with Volvo; and in April, foreign media reported that Volvo may be exploring joint development of internal-combustion engines with Daimler to reduce costs—a collaboration reportedly facilitated by Geely, which stands to become the greatest beneficiary of this series of technological cooperation and synergy. For Geely, continuously facilitating partnerships serves as both a springboard and a shortcut to entering the mainstream of the global auto industry. Such examples abound—not only within the automotive sector but across industries—much like Daimler’s merger with Chrysler back then. Chrysler sought entry into Europe, while Daimler aimed to expand its U.S. market share; both possessed vast, non-overlapping sales networks—one dominant in Europe, the other in North America—whose integration concealed enormous commercial potential. At the time, Daimler focused on passenger cars, whereas Chrysler excelled in SUVs, minivans, and light trucks; substantial opportunities also existed for shared technical platforms. Indeed, the Geely-Volvo dynamic mirrors that of Daimler-Chrysler: Volvo brings technological prowess and R&D capability—but needs capital and access to the Chinese market; Geely, meanwhile, leverages capital-market mechanisms and China’s massive market opportunity to bolster its brand strength through Volvo’s technology—and simultaneously accelerates globalization by drawing on Volvo’s global operational experience. Each party gains exactly what it needs.

Geely’s 'Financial Engineering' | Geely-Volvo 'Fission'

It is widely known that ten years ago, Geely acquired only Volvo Cars—the passenger vehicle division. Less noticed, however, is that on December 27, 2017, Geely acquired an 8.2% stake in AB Volvo (the Volvo Group). This is the critical, yet underappreciated, point. Geely achieved this stake by purchasing 88.47 million Class A shares and 78.77 million Class B shares held by the European investment firm Cevian Capital—thereby securing 15.6% of voting rights. As for funding sources, domestic reports have offered little detail; Reuters, however, reported that the transaction involved €3.07 billion (US$3.57 billion) in bank loans, syndicated across 14 banks. BNP Paribas and China CITIC Bank served jointly as lead arrangers, bookrunners, underwriters, and global coordinators; BNP Paribas additionally acted as loan agent. In short: leverage—borrowed money—was used. Moreover, when discussing the Volvo Group, one must note its subsidiaries: Mack Trucks in the U.S., Renault Trucks in France, and a 45% stake in Dongfeng Commercial Vehicle, among others. By investing in AB Volvo, Geely effectively gained exposure to the Group’s entire global commercial-vehicle business. 'In terms of brand architecture, if we draw comparisons: Geely is akin to Volkswagen; Volvo, to Audi; Lotus, to Porsche; and Proton, to Škoda.' Li Donghui, Director and Executive Vice President of Geely Holding Group and its CFO, clearly articulated Geely’s aspirational benchmark: emulating the Volkswagen Group model. Clearly, Geely’s ambitions are vast. To catch up, during its second phase of capital operations (2017–2018), Geely executed frequent overseas acquisitions—not only taking stakes in AB Volvo and Daimler, but also acquiring equity in Proton and Lotus, and fully acquiring U.S.-based flying-car startup Terrafugia Inc. Simultaneously, Geely launched multiple projects both domestically and abroad. For instance, while negotiating with Proton, Geely was reportedly advancing nearly ten international business initiatives in parallel. Rapid business expansion and frequent cross-border acquisitions have steadily increased Geely’s asset and liability scales. At the end of 2014, its total assets stood at ¥130.13 billion, with total liabilities at ¥97.47 billion. By Q3 2019, total assets had grown to ¥377.426 billion, while total liabilities nearly tripled to ¥262.06 billion. Li Donghui noted that in 2017, Geely Holding held ¥54 billion in cash and ¥24 billion in bank acceptance bills—amounting to roughly ¥78 billion in cash and cash equivalents. According to Geely’s latest financial report, however, its net cash reserve stood at ¥11.8 billion in 2019, with net receivable bills at ¥15 billion—a significant decline amid two years of aggressive acquisitions. Meanwhile, Geely Automobile Holdings’ net profit totaled ¥11.7 billion in 2016 and ¥18.8 billion in 2017, but fell to ¥8.26 billion in 2019—a 35% year-on-year decline. Hence, some foreign media analysts suggest that this 'Geely-Volvo' restructuring will help Geely secure funding to repay debt.

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