On March 28, Geely Automobile and Ford Motor Company reached a firm agreement on the sale of Volvo Car Group and related assets. Regarding this acquisition, most people in the industry hold a positive attitude and believe that Geely has made a profitable deal. But it’s really hard to say whether it’s a blessing or a curse, because there are four major challenges facing Geely Chairman Li Shufu: talent, trade unions, operations and brand. Text: Reporter Wang Yunqing Challenge 1: Talent barrier Volvo's most valuable core asset is talent. How to retain these elites is a huge test for Geely Group CEO Li Shufu. How to stabilize Volvo’s existing team? Production lines, office buildings, and even the brand itself are not Volvo's most valuable core assets, but its people. Volvo has certain advantages in many fields such as safety, new energy, and intelligent transportation. However, if it cannot leave a complete or relatively complete R&D team, the data and materials in the laboratory will not mean much to Geely. Not big. For Geely, whose main business is still limited to China, how to ensure the stability of Volvo's management team is also extremely important to maintaining an international brand like Volvo. Although the international job market is currently very sluggish, for those real talents with core skills or professional advantages, they never have to worry about being nowhere to be found. These elites in R&D, management, finance, marketing, etc. are Volvo’s truly valuable assets. Without these people, Volvo would be just an empty brand with a few production lines and a few office buildings. No matter how you calculate it, it's not worth $1.8 billion. How to stay and reassure these people is a huge test for Li Shufu. Challenge 2: Trade Union Relations Even if Geely finally completes the acquisition, if the labor and management parties cannot quickly establish mutual trust, it will be a disaster for the operation of the new Volvo. How to handle the relationship with the trade union? SAIC's failure in Ssangyong was largely due to the failure to establish mutual trust with South Korea's Ssangyong labor union. If you talk to anyone at SAIC about Ssangyong, their first reaction will definitely be: South Korea’s labor unions are so powerful! Trade unions in capitalist countries, not just South Korea, are not easy to mess with. Until now, there is still a saying that the three major American automobile companies were brought down by the United Automobile Workers Union to some extent. BAIC's acquisitions of Saab and Opel were ultimately unsuccessful, and union opposition was one of the important reasons. Although Geely and Ford have signed a final agreement, it is only an agreement between the "management" and the labor unions have not expressed support. On the contrary, Swedish unions have always had a negative attitude since there were rumors that Geely wanted to acquire Volvo. As late as March 28, the day the agreement was signed, S?ren Karlsson, head of the Volvo Cars Union, said: “Geely’s intentions for the acquisition are still unclear, which worries him. … Volvo is still a loss-making company, what does Geely plan to do? We don’t know anything about reversing this situation.” At the end of last year, reporters visited Volvo’s headquarters in Gothenburg, and every ordinary worker they randomly interviewed showed some hostility towards Geely’s acquisition. The most representative view is that after the acquisition, Geely will transfer production to China, causing unemployment among Swedish workers. Everyone says that Geely's acquisition of Volvo has now been settled. In fact, it has not yet. It is just a "big step towards finalizing the deal" because the agreement still needs to be approved by the regulatory authorities of both countries. If the Volvo union fiercely opposes it, it will To what extent it will affect Sweden's approval is hard to say. Previously, Canadian auto parts giant Magna also signed an agreement with General Motors to acquire Opel, but the transaction ultimately failed. Even if Geely finally completes the acquisition, if the labor and management parties cannot quickly establish mutual trust, it will be a disaster for the operation of the new Volvo. Challenge 3 Operational issues It is not difficult for Volvo to return to profitability in the short term. The difficulty lies in how to ensure that Volvo grows into a high-end car manufacturer with sustained profitability. How can Volvo become profitable as soon as possible? Li Shufu said that Volvo can turn a profit within two years. In this regard, the general view from the outside world is that it is relatively difficult. The reporter believes that it is possible for Li Shufu to return Volvo to profitability in the short term. Because Volvo's sales scale is small and its burden is relatively light, as Li said, as long as it effectively controls procurement costs and improves production capacity utilization, and the international financial crisis is gradually bottoming out, it will not be difficult to return to profitability in the short term. The difficulty lies in how to ensure that Volvo grows into a premium car manufacturer with sustained profitability.

As a luxury car manufacturer, Volvo's current scale is too small. The annual sales of Mercedes-Benz and BMW have already exceeded 1 million vehicles. Audi's sales last year also reached 950,000 vehicles. In comparison, Volvo's annual sales of 300,000 to 400,000 vehicles. At such a scale, it is impossible to achieve sustained profitability. Whether it can help Volvo finally reach an annual sales scale of more than 600,000 vehicles has become a hard indicator to measure the ultimate success of Volvo operated by Geely. But that's easier said than done. Why is Ford determined to sell Volvo despite losing billions of dollars? Because they argued that "the risk of continuing to own Volvo is higher." Internationally, major automobile markets have been shrinking in recent years. Even if they are expected to stabilize in the future, recovery will be weak. In addition, Geely also lacks operating experience and capabilities in the international market. At least it will not be better than Ford. Therefore, in the short term, Volvo can only place its hopes on the Chinese high-end car market. Challenge 4: Brand barrier If you drive a Volvo in the future, it will be less respectable than driving a Volkswagen, will a Volvo worth 250,000 yuan still be competitive? How does Volvo ensure its premium brand status? Volvo is in a bit of an awkward position right now. In terms of brand positioning, it is difficult to compare with Mercedes-Benz and BMW. It can no longer be called a luxury brand. A more accurate term is a high-end car brand. At the beginning, Wang Rongxiang, president of Volvo Greater China, firmly opposed the domestic production of Volvo. One of the reasons was that he was worried about brand damage. Looking at it now, his worries are justified. Since Volvo lacks the top luxury models of the Mercedes-Benz S-Class and BMW 7 Series, its luxury image is not deep to begin with. After the domestic production, the price dropped, coupled with the inherent low-keyness of the Nordic design style, although Volvo's sales increased after the domestic production. , but the brand image has indeed declined. It would be nice if this decline could be exchanged for a significant increase in sales. But the problem is that once luxury brands lose their high-end positioning and directly participate in mass market competition, they are often in a more disadvantageous situation. An unofficial rumor is that Geely said that after taking over Volvo, it can reduce the average cost of a bicycle to 150,000 yuan, the average price to 250,000 yuan, and the average profit of a bicycle is still 100,000 yuan, and it can easily achieve profitability. Such a statement is shocking. Li Shufu may indeed be able to do it, but such a Volvo cannot even be considered a high-end car! If you drive a Volvo in the future, it is not as good as driving a Volkswagen, then will a Volvo worth 250,000 yuan still be competitive?