I had an interesting conversation today with a Chinese car industry analyst about the possible motives for the never-ending dance between Geely and Ford.
On the face of it, even if Geely gets Volvo for a bargain price, the deal still doesn’t make sense. How does Geely expect to turn a profit at Volvo when Ford has been unable to make it a success after years of trying. I think it’s only fair to say Ford has rather more experience and expertise running foreign car brands than Geely.
The analyst told me he thinks the deal is a way of attracting attention for Geely as it seeks to cut a niche for itself as a private car company in China. How the government feels about the private companies, rather than state-owned firms like Shanghai Auto, is still unclear. There’s every possibility that Geely could be whacked by the bureaucrats if they see an opportunity.
As a result, being linked with such a big deal has helped propel Geely, and its charismatic founder Li Shufu, into the spotlight. Since Geely began flirting with Volvo all those months ago, its share price in Hong Kong has quadrupled.
If it keeps making optimistic noises, the hope is that it will be seen to be too important to squash. It may even, says the analyst, win it a prized documentary on CCTV (apparently this is serious priority for Chinese car execs!)
I was also told that Li Shufu, unlike the technocrats that run state-owned car makers, is basically a king of spin, much like Wang Chuanfu at BYD. These new entrepreneurs have to live off their guanxi and are forever shoring up support from the media.
The question now is: What’s in it for Ford? Why would Ford tag Geely as its "preferred bidder". This is, essentially, a meaningless title, but it gives Geely a lot of kudos. What does Ford get in return?
Are the Americans trying to force the seemingly never-ending process to a conclusion, or are they trying to flush out a rival bidder? Or, as the analyst suggested, has there been some sort of quid-pro-quo. Has Geely given Ford something in order to declare it as the frontrunner, and if so, what?