Geely Automobile will face the tough challenge of ensuring Volvo’s reputation for safety if its bid is successful, analysts have said.
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Ford said on Wednesday Zhejiang Geely Holding Group was preferred bidder for Volvo Cars and it would step up negotiations with a consortium led by the Chinese automaker.
But analysts polled by news agency AFP warned the takeover was far from being finalised and, even if eventually successful, the independent Chinese automaker would struggle to protect Volvo’s image for producing sturdy, reliable cars.
“The biggest concern is whether Geely can manage such a premium global brand,” John Zeng, a Shanghai-based analyst at IHS Global Insight, told AFP.
“If Geely wants to keep Volvo’s brand independence and integrity, then it had better not get too involved with its operation – especially not to mix the brand of Geely with Volvo. Geely is targeted at low-end customers.”
Eric Xu, head of Timer-Auto Consulting in Shanghai, said a successful acquisition would enhance Geely’s image overseas but could hurt Volvo in the process.
“It will be very challenging for Geely to safeguard the value of the (Volvo) brand,” Xu told AFP.
“A successful bid is only the first step in a successful acquisition – it’s difficult to digest what you buy. That’s the challenging part for Chinese companies who want to go abroad.”
In a statement issued Wednesday, Geely said under its bid, supported by Chinese banks, Volvo’s existing production and research and development facilities, union agreements and dealer networks would be maintained.
Geely said Thursday it was “fully prepared” to make good on the bid to buy Volvo and would “make every effort” to ensure its success.
“We made the big decision to take part in the bidding after careful consideration and assessment. We think it is in line with the long-term development strategy of Geely,” Geely spokesman Yuan Xiaolin told AFP, without elaborating.
When asked how long the talks could last, Yuan said it was too soon to speculate about a time frame. Ford emphasised that “no final decisions had been made”.
The Geely spokesman also declined to comment on the financial terms of a possible deal.
Repairing Volvo’s weak balance sheet would also be challenging for Geely, Zeng said.
“Volvo has been in the red for years,” he told AFP. “Whether Geely can alter its deficit situation remains the key question.”
