背景音乐：Viva La Vida by Coldplay
题记：Chinese industry is now acquiring brands that bring a distribution channel with them. Volvo has the skills in international distribution that Geely needs for his empire, because predictably, somewhere in the next few years, the growth in the Chinese market will abate sufficiently to allow Geely to begin exporting on a large scale. With Volvo’s specific knowledge of so many national markets, their marketing teams will spear-head the push of the different Geely brands in their respective countries, and I suspect they will do this very efficiently.
The manufacturing question? I think a lot of the manufacturing will move to China, because of the efficiencies and ‘commons’ of Chinese industry, and the Chinese Government’s efforts to improve industry supports.
China is moving towards a 165 mile per hour freight rail system, combined with leadership in renewable energy technology, as well as implementation. The West has not invested in rail transportation infrastructure for a century, and the engine technology is a a slight refinement of the engines of 70 years ago. While control systems have been computerized, the speed at which freight moves has barely changed.
China has also been investing in ‘commons’, the support infrastructure of services and sub-contractors, and the education investment needed to provide the skills to help expedite this business.
As a result, China will accelerate away from its western competitors in manufacturing efficiency, and become the low-cost industrial manufacturing leaders. In the past, the argument has been made that China achieves its low costs through cheap labor. They are transitioning to achieving lower costs by vastly improved business efficiency.
If Sweden wants to keep its manufacturing jobs, it will need to look to China to provide high speed rail equipment, and implement the same efficiency in every area.
This applies to the rest of Europe. I see Europe as very vulnerable in the future, because over 40% of most of the countries in Europe’s GDP’s are government spending. Take out the manufacturing sectors in those countries, and their economy will collapse like a house of cards.
My recommendation would be to revisit this picture over the next three years. As Chinese exports in large appliances start to ramp up, take a punt on CDS’s for national debt in the most vulnerable countries for a 5 year period. 🙂 You should make a killing.
Safe car; risky bet
LI SHUFU, the chairman of Zhejiang Geely Holding Group, China’s biggest privately owned car firm, and from this week of Sweden’s Volvo Cars, likes to describe himself as the Henry Ford of China. There are some similarities. Both men began life down on the farm and both quickly discovered they were more interested in engineering and building businesses than ploughing fields.
Unlike Ford, however, who grew cranky and anti-Semitic as he aged, the 47-year-old Mr Li seems admirably grounded. Although one of China’s richest men, he dresses inexpensively and lives in a modest Beijing apartment. In conversation, he smiles and chuckles frequently. His only known eccentricity is a weakness for writing verse. He has published more than 20 poems on his personal website and another is woven into the carpet in the reception area of Geely’s Hanghzhou base, 100 miles (160km) southwest of Shanghai.Zhejiang Geely Holding Group.
Mr Li’s career began with a school-graduation prize that he used to buy a bicycle and an old camera to take snaps of tourists visiting local beauty spots. By the late 1980s, with a master’s degree in engineering under his belt, he had moved on to making refrigerator parts. In 1994 he started making motorcycles, transforming a bankrupt state-owned manufacturer into one of China’s biggest private firms. In 1997 Mr Li’s thoughts turned to making cars. He says that he saw China “entering into an historic period” of growth and opportunity in which the demand for affordable transport would soar.
After a slow start, Geely, which means “lucky” in Mandarin, has the potential to compete with the joint ventures between Chinese and Western firms that dominate what is now the world’s biggest vehicle market. Only a handful of homegrown firms can say as much. Mr Li is hugely ambitious. Geely often takes the biggest stands at Chinese motor shows, filling them with both its prosaic current offerings and brash prototypes. The Shanghai Englon GE, a shameless knock-off of a Rolls-Royce Phantom, has a single throne-like seat at the rear. Over the next year or so Mr Li is promising a range of 25 cars spread out over five platforms and three brands. This year sales of Geely’s range of still mainly cheap, compact cars should reach 400,000, of which about 5% will be exported to countries with undemanding safety and emissions standards. In Cuba the Geely CK is now the car of choice for the police. By 2015 Mr Li aims to be producing 2m vehicles, half for export.
This week Mr Li realised another longstanding ambition: a deal he struck several months ago with Ford Motor Company to buy its Volvo subsidiary for $1.5 billion finally closed. It reminded investors just how bold and opportunistic Mr Li can be. A cash-strapped Ford had already sold its other European premium brands, and was determined to offload Volvo. But last year was hugely stressful for big car firms. Their survival was uncertain. Few were in the mood for making risky acquisitions. The lack of credible rival purchasers offered Mr Li his chance. Typically, he grabbed it.
Acquiring Volvo gives Geely an international profile and a degree of credibility it could never have achieved on its own. But it is a huge gamble. Although Volvo is currently close to breaking even (Ford says it is operating at “sustainable levels”), last year it lost $1.3 billion and sold only 335,000 cars. (At its peak in 2007, it sold 458,000.) Yet Volvo’s revenues are five times greater than Geely’s.
Mr Li knows that owning a sophisticated Western brand such as Volvo is a big step up for Geely. He says: “Volvo is Volvo and Geely is Geely. Volvo is premium, tasteful and low-profile, whereas Geely is a volume brand. We don’t want to put the two together. We will give Volvo independence and autonomy. By setting it free, we will help Volvo return to its glories in the 1960s and 1970s.” This week Stefan Jacoby, a Volkswagen executive who has been running the German group’s operations in America, was appointed as Volvo’s new boss. Volvo will continue to be headquartered in Gothenburg and a strong-looking board will set the firm’s strategy.
Armed with $900m of working capital from Geely and a commitment to build a Volvo factory in China, Mr Li’s target of driving sales to 600,000 by 2015 depends on the Swedish firm competing more strongly than in the past with the German premium brands, such as Audi and BMW, especially in China. Some Swedes worry that if things do not go well, Mr Li may cut costs by moving more production to China. (This happened with the London taxis made by Manganese Bronze, which Geely part-owns.) Some also fear that he will ransack Volvo’s intellectual property to boost Geely’s less sophisticated cars.
Mr Li insists that he will support Volvo’s management. He hopes that Geely will learn from Volvo’s global experience, and from its ability to innovate, particularly in the area of safety. Ford’s negotiators believe he will honour his promises. Despite a reputation for ruthlessness, the Ford team found him to be “very straightforward—once we had agreed something we never had to revisit it.”
A Ford executive says of Mr Li: “He’s a very ambitious individual, but he understands he has a lot to learn about doing business in the West. He will give Volvo autonomy because he knows it’s the only way to make it work. He’s more interested in growing businesses than in the details—he is very trusting of the people who work for him.”