Li Shufu was accustomed to thinking big and winning difficult arguments. Born into a farmer’s family near Shanghai, he went straight from school into business in 1984 with a tiny sum from his father. By the age of 21, he owned a factory making refrigerator components, the start of his own Geely brand.
In the mid-1990s, expensive imported motorcycles became popular in China, and Li somehow persuaded the government to let him bail out a struggling, state-owned motorcycle factory in Hangzhou. Before long, Geely motorcycles were being sold in 22 countries, including the US and Europe, and were China’s top international brand. Just three years later, having overcome opposition from all quarters, Li became China’s first private producer of motorcars. At one point, according to the China Daily, he begged an official: ‘Please let me try. It is my dream. I’ll pay for everything and take all the risks. Just give me an opportunity to win or lose on my own.’ At the turn of the millennium, sales of Geely compact cars began to take off in China and abroad. In 2006, Geely established a joint venture in Shanghai to manufacture London’s iconic black taxicab.
But Li had even bigger fish to fry. He believed that Volvo could give him the innovation, branding and technology he needed to propel Geely, and China’s auto industry in general, into global markets. Volvo at the time was owned by Ford, the US multinational. Li began courting Ford’s leadership, but Geely was both a novice and a minnow: in 2005 its sales were just 140,000 at the lower end of the market, while Ford was selling more than 6 million cars a year. At the Detroit auto show in 2008, Li met a senior Ford executive who was courteous but appeared put off by Geely’s size.
Just a few months later, however, the global financial crisis struck, giving Li an opportunity that would, in his words, be like ‘a world-famous movie star marrying a Chinese peasant’. In February, the news broke that Geely was preparing to bid for Volvo, and that Ford was keen to offload its loss-making Nordic subsidiary to focus on the crisis in its home market. A summer of speculation was followed by an autumn of Swedish contempt and outrage, as it emerged that Geely was the front-runner to take over their national treasure. Most of the Swedish media was caustic, with a great deal of scepticism that an unknown rickshaw of a company could save this sleek Scandinavian limousine with 80 years of history behind it.
Geely’s acquisition was presented as damaging or even dangerous, with dire predictions of the collapse of the Volvo brand, the closure of its mighty Torslanda plant in Gothenburg, the loss of technology to China, and mass unemployment for Volvo employees and subcontractors on Sweden’s west coast. It seemed impossible that Western and Chinese company cultures could successfully combine. ‘The Chinese car industry is primitive and has nothing to teach Volvo,’ sneered one newspaper’s motoring columnist. ‘Unless it’s about how to deal with unions – the communist dictatorship does not allow a free trade union movement.’ Another wrote: ‘Geely can kill Volvo’s strengths. … There is only one plus: the ability for Volvo to grow rapidly in China. The uncertainties and risks are far greater.’
A major fear was that the Chinese would steal technological secrets – a concern fuelled when Geely exhibited what looked like a replica Rolls-Royce Phantom at the Shanghai auto show in April 2009. Volvo’s unions said they were worried that subcontractors would stop selling Volvo the latest technology, fearing it would be stolen, leading to a loss of competitiveness and jobs. The relationship between Volvo and its suppliers was a long-term partnership based on trust, argued Magnus Sundemo, head of the engineers’ trade union at Volvo. Geely was a different animal, hiding its ownership structure behind unlisted companies in the Cayman Islands. ‘It’s scary,’ he said.
Sundemo, a soft-spoken man with a Tiggerish smile, became a tireless agitator against a Geely takeover. ‘I was one of the biggest opponents of the Chinese, I was out in the media and TV and all over the place, talking about the risk of this company just making copycats of Western cars,’ Sundemo recalls, shortly after his retirement from Volvo’s board. What could they add or bring to the table? ‘I was scared that the suppliers would disappear when they understood they would be doing business with a Chinese company. There were good opportunities to grow in China without being owned by the Chinese.’
For these reasons, Volvo’s owners should be based in the Nordic region – they should be people who understood ‘the Volvo spirit’ and its vision of cars with high environmental and safety performance. The engineers’ union called on the government to step in and find a Nordic owner. Sundemo took the initiative to create a rival Swedish consortium to challenge Geely. Consortium Jakob, named after Volvo’s first-ever model in 1927, was fronted by Sören Gyll, a former boss of Volvo Group in the years before the company was divided and its automobile division sold to Ford in 1999. Gyll had used his influence on Volvo’s board in the early 1990s to prevent a merger with French car-maker Renault. The workers had wanted to keep Volvo Swedish, Gyll said.
Consortium Jakob called on the company’s workers to become part-owners by chipping in two months’ wages. Swedish car dealers were also offered shares. Magnus Sundemo recalls: ‘We went around all the rich people in Sweden to ask for support. If we had gone to the Swedish public we could have raised the money – I got a lot of letters of support from all over Sweden at the time. But none of the politicians believed in us. They had been through the docks crisis in the 1970s when the shipbuilders went down, the government had stepped in and it was a disaster. They didn’t want to do that again. So we weren’t able to raise enough money.’
Already, however, attitudes among those closest to Geely had begun to change. The blue-collar workers’ union IF Metall was led at the time by Stefan Löfven, who five years later would become Sweden’s prime minister. In the early autumn of 2009, just as Consortium Jakob was unravelling and the dream of a Swedish buyout was falling apart, Löfven signalled a more positive attitude. His union was in touch with Geely, which understood the Swedish model, he told newspapers: ‘We are careful to emphasise that, to succeed, you must have good contacts with the employees so that they get a high level of participation. [In this way] the Swedish model gives a competitive edge. Geely says that they understand this, and that when production takes place in Sweden, it must be done on the terms that apply here. We naturally want to develop that reasoning.’ What Löfven took from his discussions with the Chinese was that production and development would remain in Sweden. ‘They see the value of Swedishness, which has to start in Sweden.’
Sundemo and his engineers also met with Geely’s top management. It was an open meeting, Sundemo said at the time, during which they got some answers. Li told them he was listening to the union. ‘It felt good,’ Sundemo said. Now he himself was beginning to feel the heat: his insistence on Swedish ownership had attracted accusations of xenophobia towards the Chinese, and he was forced to explain himself. Increasingly it looked as though Geely would win the bidding war and become Volvo’s new owner. Sundemo tells me: ‘I was in a critical position. People were asking: “Will I resign?” But we visited China and met Li Shufu. I said to him: “We both have something in common, we both love the company.” Li asked if I would support the takeover – otherwise he wouldn’t go ahead. There had been serious problems in South Korea when the Chinese did a takeover, maybe he didn’t want to repeat that. Then he told us about his plans for “freeing the tiger” at Volvo.’
Li was known for a poetic choice of words. Sundemo was not the first to hear him describe Volvo as a ‘tiger’ that he wanted to set free. ‘Free the tiger? I thought it was bullshit at the time,’ Sundemo says. ‘I didn’t understand at all what he meant. But he saw the strength in the organisation. He took a tremendous risk when he bought Volvo.’ When the deal went through the following year, Li vowed to respect Volvo’s independence. He promised the workforce that he would preserve Volvo’s big operations in Europe’s high-cost, low-growth car market, arguing that growth in China would allow Geely to save jobs in areas such as research and development.
‘Geely is Geely and Volvo is Volvo,’ Li said. ‘We should not be characterised as father and son, rather as brothers, and we want to benefit from each other’s strengths.’ Later, he told the Financial Times: ‘We gave them back their freedom.’