Volvo heading for China?
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Is China planning a boxy rebellion?
Chinese automaker Geely Automobile Holdings is said to be a leading contender to buy Volvo, the Swedish car company known for its high safety ratings and box-like designs. Volvo is currently the property of Ford Motor Co., which is trying to raise cash to avoid a federal bailout.
Ford and Geely aren’t talking, but Bloomberg News reported today that Ford is in preliminary talks with Geely about a Volvo sale. The No. 2 U.S. automaker has approached other Chinese car companies to gauge their interest, according to Bloomberg.
UPDATE: Reuters is now quoting a Geely spokesman as saying the Chinese automaker doesn’t plan to bid for Volvo.
If nothing else, buying Volvo would finally enable a Chinese company to sell cars in the U.S., even if they were made in Gothenburg, Sweden.
Analysts have been predicting for several years that vehicles produced in the Middle Kingdom were poised to land in U.S. showrooms, but overcoming safety and quality concerns has been a stumbling block. The collapse of the U.S. auto market appears to have pushed those plans back even further.
A bigger issue for Volvo-driving Americans (an admittedly diminishing band; the carmaker’s sales were down almost 64% last month) is how being owned by a Chinese company might affect the brand.
Eric Noble, president of Car Lab, an automotive consulting firm in Orange, said that being sold to Geely — or any other auto maker, for that matter — should have little outward effect on Volvo. In particular, the company’s vehicles are likely to retain their distinctive appearance.
“Automakers that are bought by larger automakers tend to be hurt in many ways, but degraded styling usually isn’t one of them,” Noble said.
In the longer term, though, trouble can arise. Sharing of components and vehicle platforms among different brands owned by the same auto company can dilute a brand’s uniqueness.
Moreover, Noble said, automakers in developing markets such as China can underestimate the amount of money required to keep a brand like Volvo up to date with consumers. American, Japanese and German automakers typically redesign their models every five years or so — a process that can cost between $500 million and $1 billion.
“The Chinese might superficially understand how often vehicles need to be renewed,” Noble said. “But the most dangerous thing is underestimating the investment required to develop premium products for developed countries with very savvy consumers and highly demanding safety regulations.”
Selling Volvo, by the way, would end Ford’s experiment of operating a stable of foreign car brands. It has already sold Aston Martin, Jaguar and Land Rover.
-- Martin Zimmerman