Geely’s folksy Li known as China’s Henry Ford

By Doug Young

HONG KONG (BestGrowthStock) – Li Shufu, dubbed the “Chinese Henry Ford,” last week was named chairman of Volvo Cars ahead of the expected completion of his Geely Holding Group’s takeover of the Swedish auto icon from Ford (F.N: ).

The $1.8 billion purchase — plus an additional $900 million in investment — was signed in Sweden in March and only awaits approval by Chinese regulators, which is expected any day now.

It is China’s largest offshore auto deal, and the latest example of its growing clout on the international stage.

The deal also reflects Beijing’s aspirations to build global brands that carry both prestige and higher profit margins in a drive to transform China from workshop of the world to a name that equates with quality and innovation.

By all accounts Li, son of a farmer from China’s eastern Zhejiang province, was a driving force behind the unlikely takeover of a world renowned auto brand by a relative unknown.

When Li, now 47, first started making cars in 1997, he dismissed critics who said he had no track record. Making a car wasn’t hard, he said; it was just “four wheels and two sofas.”

His plain-folks persona shares some traits with Ford, including a childhood on the farm and a scrappy determination to build a car-making behemoth from nothing. So perhaps he was destined to buy Volvo from the company that Henry Ford built.

But it was a series of unfortunate events in the world that led Geely, which means lucky in Mandarin, to buy the loss-making Swedish brand from Ford. Much of the developed world had tumbled into financial crisis, Ford was posting one record loss after another, and other leading automakers such as GM were on the ropes as well.

Geely, meanwhile, was in the black and rising rapidly in fast-growing China.

A mechanical engineer by training, Li lives in a modest apartment in Beijing, said Lawrence Ang, executive director of Zhejiang Geely Holding’ publicly traded arm, Geely Automobile (0175.HK: ).

HUMBLE BEGINNINGS

Now one of China’s richest men, Li had humble beginnings. After high school, he used a small graduation gift to buy a camera and open a photo studio in his village.

He put earnings from that business into an operation salvaging gold from discarded appliances before moving into the refrigerator parts business in 1984.

Motorcycles were next, as he took over an ailing state-run firm in the mid-1990s and turned it into China’s best-known domestic brand. He later moved into cars, and built his company into one of China’s largest privately held automakers, aiming to sell 400,000 vehicles this year.

Like Henry Ford, Li’s focus is on the mass market, with models such as the Free Cruiser and Geely Kingkong, which sell for as little as 40,000 yuan ($5,859). In contrast, Volvo’s top of the line XC 90 sells for up to $205,000 in China.

Hong Kong-listed Geely Automobile has seen its stock soar more than eight-fold since 2006, including a more than six-fold jump in 2009 alone on high hopes for the Volvo bid and strong sales in the world’s largest car market.

Li, increasingly setting his sights on expanding onto the global stage, is also eyeing a deal to increase Geely’s hold on loss-making London black cab taxi maker Manganese Bronze (MNGS.L: ) by taking a controlling stake and moving more of the production of the TX4 cab to China.

The takeover does pose some risks for Geely, especially if

Li keeps his promise to maintain Volvo’s costly plants and workforce. Absorbing a company whose revenues are five times larger than Geely’s will be a challenge. Most cross-border takeovers of car makers fail, auto analysts note.

But Li does have some powerful backing, including a major investment by Goldman Sachs (GS.N: ).

More recently he has become more practiced at navigating China’s political waters, and serves as a member of the Chinese People’s Political Consultative Conference, a largely ceremonial political advisory body.

His bid for Volvo was publicly endorsed by Beijing, in contrast to General Motors’ (GM.UL: ) efforts to sell its gas-guzzling Hummer brand to Tengzhong, a little known Chinese machinery maker, which foundered after failing to get state backing.

“Li is indeed a man with vision. He is someone that shouldn’t be underestimated,” said a senior executive with a major Chinese state auto group who asked not to be identified as he is not authorized to talk to the media.

“I think he has a big chance to make it because he has the Chinese government and, most of all, the huge China market behind him.”

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(Editing by Bill Tarrant)

Geely’s folksy Li known as China’s Henry Ford