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

(For a special report on the deal, click [ID:nSGE66F0CR])

By Doug Young

HONG KONG, July 22 (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: ).


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. [ID:nLDE62G067]

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

“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 authorised 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.”

Stock Market Trading

(Editing by Bill Tarrant)

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