Chapter 13 Chapter 12 Why Chinese Enterprises Can’t Go Global: Geely’s Acquisition of Volvo
On March 28, 2010, China's Geely Automobile Group and Ford Motor Company of the United States formally signed a contract to acquire 100% of Volvo's shares in Gothenburg, Sweden. This is the first time that a Chinese car company has fully acquired a foreign luxury brand.
Although Li Shufu has repeatedly emphasized that "Geely is Guli, and Volvo is Volvo, Geely will have two sets of management teams to serve different consumer groups."
However, the media has doubts about whether the two cultures can blend harmoniously, especially how Geely properly handles trade union relations. The road to overseas mergers and acquisitions of Chinese companies is not smooth.
From the nightmare of Shougang taking over the Peruvian iron mines, to SAIC's merger and acquisition of South Korea's SsangYong, labor disputes have always been the dilemma for Chinese companies "going overseas".
At present, Volvo's union has agreed to Geely's acquisition, but Geely must be prepared to experience some bumps in order to tame the Scandinavian Mustang.
Tengzhong's acquisition of Hummer now seems to be just a farce, and Geely's acquisition of Volvo seems to be for real.I think the difference between Geely's acquisition of Volvo and Tengzhong's acquisition of Hummer is that one is completely unreliable, and the other is not very reliable.Everyone knows that Volvo Cars claims to be the safest car in the world. It turned out to be a famous Swedish car brand, and Volvo Car Company was once the largest car company in Northern Europe.On April 1, 1999, it was officially acquired by Ford Motor Company for $6.45 billion.After just 11 years, Volvo was abandoned.But now, China's Geely wants to buy 100% of Volvo's shares at a price of US$1.8 billion.Geely, which has only 13 years of car manufacturing history, wants to marry Volvo, which has 80 years of car manufacturing history. In Li Shufu's own words, Li Shufu, a rural youth, married a beautiful Scandinavian woman!I think we have to figure out first whether this rural youth is marrying a "beautiful woman" or an "abandoned woman". Beauty is beauty, and abandonment is abandonment.
Volvo was bought by Ford in 1999, and it has not improved for a whole 10 years. Behind this is not only the failure of Ford, but also the complete failure of the strategy of opening up the luxury car market through acquisitions.In fact, for this dream, Ford established an independent luxury car group. Under this strategy, Ford not only acquired Volvo, but also acquired top European brands such as Aston Martin, Jaguar, Mercury, and Land Rover. luxury car brand.However, customers soon discovered that, except for the trademark of Volvo, many things have become Ford quality.why?Because the integration after the Ford acquisition was too successful.For example, currently Volvo mainly has three major model platforms, among which, the P1 platform that produces compact cars mainly produces S40, V50, C70, C30 and other models; the P2 platform that produces large and medium-sized cars mainly produces S60 and XC90 series models; The P24 platform mainly produces XC60, V70 and S80 series models.The so-called car-sharing platform strategy refers to the sharing of a platform for several car models during the development and production process.The produced models may have great differences in appearance and function, but they have the same chassis technology and body structure.For example, at present, Ford's three major brands, Ford Focus, Mazda 3 and Volvo S40, use the common P1 platform in China.Therefore, if we observe Volvo carefully, we will know that Volvo cannot do without Ford in terms of production platforms and key spare parts.So I was wondering what Geely got?In the final analysis, Geely only obtained a production platform in cooperation with Ford through Volvo.Do you want to take this to get into the luxury car camp?Impossible, the customer soon understood that a Volvo was no longer a Volvo, it had become a Ford car.To Europeans, Ford's cars are similar to Americans' view of Chinese products, or even inferior to Chinese products. Chinese products are still cheap, but American cars are expensive, and they have no history and taste.So in the end you found out what a luxury car is selling for?Luxury cars don't simply sell quality.Do you think the quality of Jaguar is good?The quality of Jaguar is not very good, it just feels like selling.In the end, after luxury cars felt that they could not be sold, Ford's entire luxury car division collapsed.
In fact, Volvo is an abandoned woman all over the world.Not only that, Aston Martin was also sold in 2007, Jaguar and Land Rover were also sold in 2008, and then Ford headquarters thought that this division was too bad, so they took Mercury and Lincoln back to direct management, and finally there was only one Volvo, as a result, is now sold to Li Shufu, a rural youth.In fact, Volvo is an abandoned woman all over the world. Ford finally got rid of this burden, and the entire business department is gone.In the 11-year history of this luxury car division, 4 bosses have been changed. This strategy has not been successful in 5 top European luxury car brands. Why should we believe that Geely can easily succeed?
This time Li Shufu bought Volvo with US$1.8 billion, half of which was his own funds and the other half was raised.With such a high amount of money to buy such a so-called "abandoned woman", and this abandoned woman is taller, and you are half a head shorter than her, marry her into your home, do you want to sell the car you produced to Europe? How about going to America?In the past, it was Volvo's body and Ford's soul, which can no longer be played. Now after changing Geely's soul today, you find that you still can't get rid of the soul embedded in Ford.Because all the platforms and parts you make are Ford's.What did it end up being?It's the shape of a Volvo, the soul of a Ford, and then a little auspicious soul is pulled into it.So do you think that for Europeans and Americans, if they want to buy a luxury car, will they buy a Volvo or a Mercedes-Benz?Therefore, in the European and American markets, sales are definitely worrying.In the Chinese market, if we play with patriotism, the sales may be okay, but it is only possible.A few days ago, a friend who bought a Volvo last year complained that he saved a lot of money and bought a Volvo, which is now made in China and auspicious.Readers, don't think this is just whining. What is hidden behind this so-called pain?It is a loss of brand loyalty, a crisis of trust.
Why did Volvo, a luxury car brand with a long history, "marry" Geely, a mid-to-low-end brand with only 13 years of car manufacturing history?Does Geely's 100% equity acquisition want a brand, a car assembly line, or a news hype?Li Shufu said that Geely's acquisition of Volvo does not mean that Geely will manage Volvo. Geely and Volvo are brothers, not father and son.Geely is Geely, and Volvo is Volvo. We use two sets of management teams to deal with different service groups.Our Chinese entrepreneurs like to say this most, so let me ask you, did Liu Chuanzhi say the same thing when he bought IBM?It's not us who take care of it, it's a brotherhood, we are brothers.The results of it?So, we are tired of hearing this, whether you are a brother or a sister, in the end, what do you do when the labor protest strikes?You still have to come out and deal with the problem.
A key issue emerged here.According to media reports, the Volvo labor union was very opposed to it at first, but later agreed to sign the agreement.You see what their union president had to say, he said, "We're not very excited about the decision, but we think the acquisition is on the right track, and we've got key questions answered." Reader Note If not, what does this key question refer to?It's because no one wants it, and now it's finally sold, and I'm so excited.If you object any more, no one will want you, and you will all be unemployed.Moreover, those institutions and factories in Sweden and Belgium have retained the original personnel, and at the same time gave Volvo a new development plan.Isn't this the same as when IBM was acquired by Lenovo?
Volvo's team got to where it is today because they didn't do well.If Geely is in charge of Geely, and Volvo is in charge of Volvo, isn't it also an incompetent team in charge of Volvo?Will there be any good results?It should not repeat the mistakes of IBM.
To be honest, Ford's ability is not bad. You must know that Ford is the only one of the three major American automobile groups that refused government assistance during the financial crisis.General Motors has also had a similar acquisition. In order to enter the luxury car market strategy, they acquired half of the shares of Saab, a top European brand, in 1389, and then completed the entire acquisition in 1999, the same year that Ford established the luxury car division. .The results of it?It's not a mess, and in the end, no buyer can be found, so the brand has no choice but to be abolished.
The last of the Big Three, Chrysler, had similar entanglements, and it was more intense. In November 1998, it simply merged with Germany's Daimler-Benz.The results of it? Nine years later, it is impossible to even share the development platform and collectively purchase parts.Under normal circumstances, both sides of the merger and acquisition usually think that they can share components, structural design, procurement, etc., but it is difficult to operate in practice.Daimler was actually reluctant to share designs with Chrysler for fear of the impact on the Mercedes brand. "Different cultures and people have different ideas about product design and production, and there will be many problems in the middle." European auto analysts believe that differences in culture and technology hinder the merger process. "Even if a global database is established, it will be difficult. Completed." At the beginning of the merger in 1998, the management of Dyke had hoped to integrate Chrysler's sales network in North America and Daimler's sales network in Europe, so that the two markets could integrate with each other, because they also valued the strength of both parties. Complementarity across product lines.Did they do it?Facts have proved that there is still no. In 2007, Daimler sold Chrysler.With so many failure cases in front of us, can Geely become the only spared auto company in the world?
Geely is relatively lucky because it grew up in China. Li Shufu himself has never been tortured by the trade union. Do you know what will happen if the trade union fights with you?Don't tell me about car brands and souls. We talked about issues that are not as serious as trade unions.What do you do if Volvo workers demand a raise every year, go on strike, take to the streets to protest?Especially the Nordic high-welfare countries like Sweden.Moreover, 100% of our Chinese entrepreneurs have no experience in fighting trade unions.For our Chinese entrepreneurs, the most difficult thing to deal with should be this kind of labor relations and trade unions abroad.
The acquisitions and mergers of these European and American auto companies mentioned above are at least still in the honeymoon period, and our Shanghai Automobile's integration of South Korea's Ssangyong has basically never had a good day, and has been breaking up. In 2005, SAIC acquired South Korea's Ssangyong and obtained an absolute controlling stake, thinking that it would be able to enter the SUV market.But SAIC didn't understand at all how powerful Ssangyong's labor union is, even the South Korean government can't deal with it. Do you think you can send a few directors and managers to handle it?This kind of arrogance and stupidity of SAIC is also rare.Maybe they still haven't figured out why the South Korean workers went on strike. Is it really just because they said that they want to increase wages, increase benefits, and not allow layoffs?Just think about it, more than 1,700 workers went on strike for 77 days and had fierce conflicts with the government, all for these three simple conditions?Take a look at the riot on July 22, 2009. How much blood was shed when the strikers fought against the police?According to statistics, 23 policemen and more than 60 workers were injured that day.Later, the South Korean government, Ssangyong’s management and the media tried their best to persuade Ssangyong’s labor union to stop the strike. They also cited an example, saying that Daewoo Motor was facing bankruptcy in 2000, and was later acquired by General Motors of the United States. Although GM dismissed more than 1,700 employees, 5 Years later, GM Daewoo revived, and most of the dismissed employees returned to their jobs.You'd be naive if you thought this would persuade the trade unions.You have to know that trade unions are a very large interest group in foreign countries, because they have a very large vote base, and no politician wants to take advantage of trade union strikes to gain some political capital.If you study the strike at that time carefully, you will understand that not only the workers of Ssangyong were making trouble, but also workers from Kia Motors and other factories around it came to support, about 700 to 800 people.What they want is the effect of bloodshed, what is the purpose?Their real purpose is to express dissatisfaction with the Lee Myung-bak government, because Lee Myung-bak was the former boss of Hyundai Motor and was known for his tough treatment of labor unions.They just want to shed blood and create the impression that the government is favoring foreign capitalists, so that the public feels that the leftists need to enter Congress to check the rightist government, so that the labor unions can enter Congress smoothly.see it?This is the trade union, which is completely different from our trade union. We have not figured out the intricate relationship between it and politics at all. Our entrepreneurs have never encountered this kind of thing before, and they don't know how to deal with it. And this is precisely the most uncertain risk in China's overseas mergers and acquisitions.
There is also a ridiculous case that can be used as a reference for readers. On November 5, 1992, Shougang Group purchased 98.4% of the shares of the Peruvian state-owned iron ore company that was on the verge of bankruptcy for US$118 million. For Shougang, the nightmare began. As soon as the acquisition was completed, various strikes and demonstrations followed Staged, in the words of a leader of Shougang, "After every effort to solve the problem, we face the next wave of threats. And the purpose of every strike is almost to increase wages and benefits." In July 2009 The strike lasted for more than 10 days. Under the leadership of the mining workers' union known as "the most combative in Peru", workers marched around, shouted slogans, smashed glass, burned cars... so that Shougang finally had to promise another wage increase.Later, these workers planned to strike indefinitely on March 29, 2010. What was the reason?"The company did not deliver on its wage increase promises," they said.
Do you know how powerful the trade unions are in Peru?They even supported a ranger, who did nothing but go on strike.They went on strike twice in three days, which made Shougang exhausted. You know, every day they went on strike, they caused Shougang to lose about 1 million to 2 million US dollars. The leader of Shougang said, "It's really disheartened. It's not easy."Also, don’t think that they just want to increase salaries and benefits. In fact, the salaries of Peruvian workers are relatively high in the local area. The total monthly income of their senior staff is as high as 5,000 US dollars, and the income of middle-level enterprises is also around 2,000 US dollars.
The benefits enjoyed by their employees are beyond the imagination of our domestic workers. Even so, they still go on strike at every turn. What is the real reason?In fact, it is the same as the strikes held by the SsangYong trade union in South Korea. Every strike is "premeditated and organized". , never tired of organizing workers to strike."
From the above two examples, we can see that Geely has never experienced all these difficulties.In this case, the question arises, how will Geely deal with Volvo's labor union when it acquires Volvo?Do you think about how their union will deal with you?The trade union's method against you is organized and strategic, and there are special forces in it.The trade union protests of other people have been experienced for hundreds of years. What experience does Li Shufu have?In fact, Li Shufu himself made a statement about trade unions. He said, "We need to open our hearts to Volvo's trade unions, and we must listen carefully to what they are saying." The operation of the Western economy and the management of Western companies have their own A set of logical laws, let's not take the Chinese set of things, it will definitely not work.He said that after more than two years of negotiations, our trade union has done a lot of work, including this time when we talked with him, they didn't understand a lot before talking with him, and they started to applaud after explaining it to them.He also said that let's not think of the union as a particularly bad organization.I told Comrade Li Shufu, "Those trade unions are indeed not particularly bad organizations, they are devils." Do you know why the trade unions are responding in good faith now?That's because you haven't bought it yet.What are you basically talking nonsense, what does our union do?Our trade unions specialize in film appreciation parties and solidarity activities, which are completely different from their trade unions.Do you want to hear their voices?Then let me tell you now, there is only one voice saying "salary increase", will you increase it?Annual salary increases and medical insurance are the same as what happened in Peru.But people also have political goals, which is more complicated. I hope that Volvo’s trade unions will not have any political goals. If there are political goals, then you will repeat the mistakes of SAIC’s acquisition of Ssangyong. If the combat effectiveness of its labor unions is like Peru is so strong, what should you do?
When we first started building cars many years ago, many people thought that a car was just two sofas and four wheels.Yes, of course it was then.But now this car is not a simple assembly and manufacturing problem, but a system engineering, which is very complicated, and the complexity is far beyond your imagination.Geely's acquisition of Volvo, if you want other people's manufacturing experience, design ideas and soul, I think this is not reliable.We must know that the failure of all multinational car companies' mergers and acquisitions is often not due to the lack of spare parts, structures, etc.For example, Daimler sold Chrysler in 1997, Fiat broke up with GM, Hyundai Motor separated from Hyundai Group, Renault and NISSAN were blown away, NISSAN was dragged down, BMW and Rover merged, etc. are all failure cases.And the main problem is that there is no successful case so far.And why did it fail?What is the reason?
When these auto factories were acquired, we obtained detailed information on the entire acquisition process and technical details of the acquisition, including Ford's acquisition of Volvo.What should be improved and how?Marketing plan, management plan, very, very detailed.But are you auspicious? You are not even as good as others in the preparation work. If you are still at the stage of preaching so far, why don't we worry?In fact, I hope that Geely can succeed, and I also hope that Lenovo can succeed, but is hope useful?It's useless, what matters is whether you have the strength to go on the road to success.
Another one, Geely said it would transform Volvo.But, think about it, can Geely's transformation of Volvo surpass Ford?With such a strong car empire as Ford, you would never think that Geely is stronger than Ford.Even Ford didn't revitalize Volvo, and sales are now going from bad to worse. How can Geely revitalize such a car giant?Geely also said that Geely's manufacturing capacity today is better than Toyota's in 1983.Sorry, I really didn't see this. What Geely lacks today is neither manufacturing capability nor assembly capability. Do you know what it lacks?Compared with Toyota in 1983, Toyota does not have a complete management system. In 1983, Toyota had swept the United States.I already bought a Toyota when I was in the US.The whole system of others cannot be caught up by any of our automakers.The efficiency and sophistication of its entire system are not something Volvo can catch up with.So everyone must not say that Geely surpasses Toyota in 1983, that is impossible.You can only talk about what the manufacturing capability or assembly capability might be, but I doubt even that.You say that the whole system surpasses Toyota, that is absolutely impossible.Even Boeing has learned Toyota's lean management techniques.I don't think any automaker in the world can surpass Toyota.
Let's look at the core of the automobile manufacturing industry - the technical issues of the engine.Geely said they have a strong R & D team and strong financial support.In fact, we can look back at the road that Chinese-made engines have traveled.Let me give you an example, Chengdu Wittur, FAW Wuxi, Guangxi Yuchai, the parameters of the engines made in the laboratory are all up to standard, but as long as they are mass-produced, the product quality will be out of control.Even these big factories are at this level. You Geely neither have the high starting point nor the rich experience of state-owned enterprises. In my opinion, you only have ambition. How far do you think your Geely can achieve in research and development?Geely always said that they have such ambitions and what kind of engine they can make.I want to tell Geely that I still want to buy Boeing. I am also very ambitious, but is it useful to just shout?You have to have a reason for success.You are so ambitious, you have such a team, and now you are still inspecting other people's spare parts, and Ford has already reached this stage.What conditions does Geely have better than Ford?Many times what you want to learn is not the same as what you get in the end.For example, when SAIC acquired South Korea’s Ssangyong, what it wanted was SUV technology, and it got it in the end, but it got more strikes and riots, and finally had to flee.So, you, Geely, who just learned how to build a car, can handle something that even a car giant like Ford can't handle?I hope that Geely will stop talking big and empty words, but speak with facts.Compared with so many failed car factories, how can Geely's concept surpass these car factories?You say you are confident of success, what do you use to prove that you can succeed?
Some people say, look at the performance of Geely's listed companies in Hong Kong.However, we can't just look at these short-term superficial figures. If Geely successfully acquires Volvo, the stock price will not only double, but will multiply several times.Isn't this just like Lenovo, when Lenovo acquired IBM, didn't its assets suddenly expand?Then someone said again that this was Li Shufu's big gamble.bet?If you really want to gamble, you might as well go to Macau casinos, the result is the same anyway.
Having said so much, I have to affirm my point of view. Today’s talk about Geely is not just to criticize Geely, including Lenovo is not just to criticize Lenovo.What I want to say is that behind Geely and Lenovo, there are one case after another of our Chinese companies, which has formed the phenomenon of Chinese companies collectively "going overseas".Although I have encountered many bottlenecks in the past, the problem is that this impulse and enthusiasm for "going to sea" has not weakened in the slightest.I started going out in 2007, and until now, I still go out like crazy.I have a data here. In the first quarter of 2010, the total amount of China's overseas M&A was US$11.6 billion, an increase of 863% over the same period in 2009, which simply created a historical record.Moreover, from 2010 to now, China has conducted a total of 5 M&A transactions with an amount exceeding US$1 billion, of course Geely is one of them.In the same period of time in 2009, there was no M&A transaction of this scale, and the enthusiasm of Chinese entrepreneurs to go global was so high.But if our entrepreneurs are only staying at the stage of enthusiasm when they go out, it is better not to go out.Because we can't see any detailed reports or detailed research at all. If you can't even reach this level of analysis, think about it, what will be the result of going out?
Japanese companies (most of which are manufacturing industries) have successfully expanded their business to the world, providing the world with a variety of high-quality products, and Toyota is naturally one of these companies.However, although the products created by Japanese companies can be said to be impeccable as objects or mechanical devices, it is difficult for people all over the world to directly feel the value, culture and beauty of Japan from these products.However, users of high-end brand products can often appreciate the culture and beauty of the country where the products are produced from the high-end brand products they buy.Toyota has chosen the daunting challenge of creating a luxury car imbued with the essence of Japanese culture in addition to producing mass-market cars.For Toyota, which has always produced mass-market cars, it is a brand-new undertaking to let wealthy people from all over the world buy luxury cars under the Lexus brand produced in Japan.How to integrate the essence of Japanese culture into the Lexus brand through research and development and marketing is the first essence of the theme of "from Japan to the world".
Another important significance of the theme of "from Japan, to the world" is that from this process, we can get a glimpse of Toyota's organizational and leadership style that makes Lexus' unique R&D and marketing model come true.While Toyota is a very Japanese company, it is also a representative company worldwide.In Toyota's DNA, there should be an organizational model, operating method, and leadership style that can be used universally around the world.The core purpose of this book is to explain Toyota's unique organizational capabilities through a case study of Lexus.
This article is excerpted from "The Miracle of Lexus" by Haruo Takagi