Li Shu Fu talks Volvo with Sohu
Published August 29, 2011
The Chinese automotive mega portal at Auto.Sohu.com recently had a sit down chat with Geely and Volvos CEO Mr. Li Shu Fu on the direction of Volvo and of course Geely. As Volvo was purchased by Geely over a year ago Auto.Sohu were eager to find out what Li Shu Fu thought of life behind the reigns of one of the worlds most famous car companies. The interview was a three way interview with Li Shu Fu, and Mr. Wu Ying Qiu, a relatively well known auto industry observer in China and of course Sohu were asking the hard questions:
Sohu: Geely has owned Volvo for exactly a year now, from the operating side of things are you happy with what Volvo has achieved this year?
LSF: The world has been watching Volvo closely this year, people have been supportive of our efforts, especially the Volvo workers, to sum it up we have been extremely successful this year we have jumped over our initial sales and new car development goals and reached new highs on customer satisfaction indexes. In the past few months the world auto market has not been so hot, however no matter if its in the US, European or other markets Volvo has done extremely well, we are all really satisfied with what has been achieved.
Sohu: Actually, a yearÃ¢s time is basically to short to critique GeelyÃ¢s management of Volvo. Mr. Wu, from your point of view as a commentator on the car industry, what do you care about the most with regards to Geely and Volvo?
Wu: IÃ¢d have to say that GeelyÃ¢s first year running the show at Volvo started with a bang and the management so far has been okay. But after talking with Li Shu Fu today I understand that Geely has had to enter the core management of an international company and then understand the operation of this international company and put what they have learned into practice. I believe that from my point of view there will be many stories from the back end that we havenÃ¢t yet learned about.
LSF: After a year in the hot seat at Volvo I understand a lot more about the company, of course before I took over I had a certain idea of what the company would be like in terms of culture and operating style, but the reality was not exactly like I thought. With Volvo being a Western, global, mid level car brand with a hundred year history there is a certain element of culture and history, our strategy is to emphasis VolvoÃ¢s culture and history to consumers in mature markets and also spread this culture to developing markets such as China, this is the base framework of our development strategy. We also want to bring VolvoÃ¢s factories in Sweden and Belgium into play, at the same time we are looking to develop the Chinese market. We have had the same strategy since we first received ownership of Volvo and this plan is unlikely to be changed going forward.
Sohu: Can you estimate when you will enter the Chinese market?
LSF: Some people believe that the Chinese market has some sort of special properties, most world automakers are now relying on the Chinese market to develop further, Volvo should also follow this example, but there are some Volvo management and directors that believe Volvo is a luxury brand, and a responsible company, In the 80Ã¢s and 90Ã¢s Volvo had a big emphasis on environmental protection, in these two areas Volvo cannot have a compromise, therefore after a long time we decided that these two issues had to become one. VolvoÃ¢s cars will be designed on a global basis and to a global standard. We wont make poorer cars for the Chinese market, this is not acceptable, we want to work on VolvoÃ¢s global standards, quality has to be high. We are working to push more in line with our global idea.
Take for example the Volvo yachting race series. The series is a high level competition but VolvoÃ¢s sponsorship needs several hundred million RMB every season, originally Volvo didnÃ¢t put China down as an important stop on the around the world race, but now that Volvo is a Chinese company of course this changed, but there is not a lot of interest in sea based sports in China yet, the Chinese still prefer calmer, more gentle sports.
I really support Volvo sailing coming into China, I think for the Chinese market post reform is the best time for such a sport to enter the Chinese market. We should bring the best of Western Culture to China, and take the best of Chinese culture to the West. Volvo Sailing is the highest level ocean going sport there is today and the biggest ocean going race to date. IF we can bring such a sport to China, and let more Chinese enjoy watching and taking part we can improve the situation a great deal.
I believe that todayÃ¢s China will become a new type of country Ã¢? we have a harmonious society and a society led by science. We need to take sports of the human race and the entire Chinese culture and follow a scientific development. The race series is monitored by satellite, weÃ¢ve invested a lot into each boat, they are clean boats that donÃ¢t burn any fuel, instead they of course rely solely on wind power to take them from stage to stage facing giant waves on each journey.
Wu: With regards to VolvoÃ¢s performance over the past year we have all been very supportive. I think that GeelyÃ¢s buyout of Volvo was a major step forward for the Chinese car industry, it will have a knock on effect on the development of the world car industry.
After listening to Li Shu Fu talk today and my own thoughts, Geely buying Volvo really was a major issue in the world auto markets. Firstly, we always like to look read figures and numbers, sales reports, financial statements etc, but reports on corporate culture are hard to come by. I think itÃ¢s obvious that VolvoÃ¢s performance this year is not down to Li Shu Fu and Geely as the Ã¢Chinese EffectÃ¢ has yet to take place, this will no doubt happen as the two corporate cultures have greater connections further down the line. Secondly, the public has been expecting much of Geely since the group purchased Volvo a year ago, and people have expressed lots of opinions from different perspectives. But I would like to make some points on what Chairman Li has said. Over the past year, opinions of both the media and the public on the acquisition can be summarised asÂ several manys and several fews: many on short term matters, few on the future; many on numbers, few on development of the company; many on minor issues, few on major ones. This is my reading of the situation.
Sohu: Talking about culture, I understand that Geely has sponsored a few Zhejiang based bands to tour Europe next month, from what I know two events are being laid on especially for Volvo staff as a gift and that two poems that you personally wrote have been turned into musical pieces.
LSF: How did you hear about this?! We didnÃ¢t release that news yet! We know that music isnÃ¢t restricted by borders and it is another type of language. Communication via language is the easiest method, although you can have different countries, different races with different cultures and different musical styles but Chinese music is very classical and is highly welcomed. The bands will visit 6 countries in Europe on their tour, itÃ¢s a cultural exchange that will allow Europeans to enjoy Chinese music and the style we offer, overtime there will be a greater understanding between the two parties.
Actually, the name for China in Westerners eyes is very powerful. We Chinese think we are the center of the earth, so we called ourselves Ã¢The Middle KingdomÃ¢Â so how can we let other people know about our culture, how we can make our culture more acceptable to Western tastes? Now basically nobody in China thinks of themselves as being Ã¢The Middle KingdomÃ¢ and nobody thinks that China is the best country in the world. But before we really were a great country.Â Now weÃ¢re in an age of globalization, the digital age is highly developed, communication tools are highly developed too, so how can we push for the further mixture of Chinese and Western culture? Music is a convenient, simple way to spread culture, no matter if you understand or donÃ¢t understand the lyrics it is still enjoyable to listen.
In the future we will bring European bands, such as the The Royal Stockholm Philharmonic to China for Chinese audiences to listen and appreciate.
Sohu: When we started the interview we talked about VolvoÃ¢s product planning and break down. We talked with VolvoÃ¢s product managers regarding VolvoÃ¢s plans to persuade Chinese consumers to buy VolvoÃ¢s, we understand that Volvo have gone through some unusual measures to help their designers understand the luxury needs of Chinese consumers such as making them tour the Imperial Palace in Beijing and also making them stay in Chinese 5-star hotels.
LSF: This is difficult, it is hard to persuade them [high end consumers]. We need to persuade consumers by our actions and facts, these will be our big talking points. China has many excellent that project the idea of face, we can accept this, but this is an advantage and a disadvantage. Westerners are the opposite, they talk about the quality of something rather than its face projecting abilities, this is a problem with Chinese culture. Take for example Chinese style hotels, they project the very essence of face, big enterance halls are the way forward, but in Sweden these big halls could easily become a hotel in themselves. Another example would be the Chinese dinner table in a restaurant, we put a lot in the table, sometimes the table is huge too but to Westerners this is not considered scientific, itÃ¢s a waste. I can think of many other examples, but these are just two.
China certainly has this idea of face over actual ability, we donÃ¢t think far enough ahead, we just donÃ¢t talk about it and then thatÃ¢s it, we never take it to the next level. These are ChinaÃ¢s current problems. For Westerners it is a different story, they do not think like this, they think about an objects quality, how it will develop over time, how it will be used, how it will behave and if there will be any changes, the idea of face is not so entrenched. We talked about the Imperial Palace earlier, it is such a big place but only for an Emperor, they had doors with hallways and hallways for hallways, in the past Chinese farm houses were designed in a similar style, slightly richer people would add more hallways and more rooms and this has become a big part of Chinese culture. Everyone wants to buy a slightly bigger car, they like bigger houses, when they go to resteraunts they want bigger tables, this has also became a part of Chinese culture.
But in Westerners eyes this type of culture is difficult to support, they think first about resources. How can we solve the Chinese energy problems? Your house is bigger, so it needs more resources, your car is so big, so it needs more resources too. Im not saying that this green issue came about after Geely bought Volvo, itÃ¢s something weÃ¢ve thought about for the past 5, 6, 7, 8 years ago, when I talk with foreigners about this problem they always talk about the green issue, personally I think this is a character issue. Until now, Chinese have not answered the resources issue, and they donÃ¢t know how to answer.
We just talked about big cars and small cars, how can we make Volvo the same as other car manufactures? Volvo has never made a car to rival the Mercedes S-Class and the BMW 7-Series, for us its an empty segment at the moment, so for us we donÃ¢t have the big car little car issues that other manufacturers have, this is not a we should design a big Volvo issue. We could potentially make a higher end Volvo but not just for the Chinese market, it needs to be a world product, there needs to be a unanimous decision [if we are to go ahead.]
Actually if we put together those three things together, how can we achieve long term growth? How can we solve the resources issue? How can we overcome putting the idea of face before actual quality and ability? For Volvo, we wont change any of these core ideas, VolvoÃ¢s core principles will not changes at all, nothing will changes. I believe that VolvoÃ¢s ideas are correct. Looking at issues we need to look at the essence of these issues
Sohu: You just talked about the China issue, how can you make a product that is both suitable for Chinese tastes but suitable for the global market at the same time. We know that China is VolvoÃ¢s third biggest market and from sales stats we can see that China is not a main market of Volvo. Many overseas critics see the Chinese market as a saviour of Volvo, if we look at ChinaÃ¢s ability to lift Volvo what do you think of VolvoÃ¢s future?
I think if you want Chinese companies to take the global stage then you have to think about the Chinese market, this cannot be ignored. China is already a part of the global economy and is now a major part of that. You canÃ¢t rely solely on one market to save a global brand.
Up until today in VolvoÃ¢s history the Chinese market has played a very small part, actually in the Chinese market they only have a very small market share with around 50,000 cars sold in China, but the global market has surpassed 500,000 units. China is still a developing country, our strategy is clear, we will focus on consolidating and developing our market share in mature markets such as Europe and North America and then we will work to develop China and other developing markets. If the EU-US markets were to not consolidate and we focus solely on developing the Chinese market then I would say there is no chance of saving Volvo. Of course we are paying great attention to the Chinese market and how it will develop but of course we cannot develop the market in such a short time. We need to make a plan, and put the plan into action, a plan needs time. Privately owned car companies in the Chinese market have a difficult time, so we need to think each step carefully, how we will go ahead, what we will do, and how we can do it better, these are the problems we are looking at first, we are not overly eager.
Sohu: Today we talked mostly about the Volvo issue, but I also want to ask a question about Geely. As a domestic Chinese brand Geely has gone down a different path of development over the last 4 to 5 years, if you could give Geely a grade on how it has performed over the past few years what would you say?
LSF: Firstly, a change of strategy is not a bad thing, if you want to keep ahead then you have to plan to stay ahead. You need to have the technology, the brand quality, the service levels and good company morals, Geely is working on improving these. If you donÃ¢t pay particular attention to certain areas, such as company morals then developing the managerial chain of a company is difficult, without strong morals a company has no future.
We need to continue to struggle to develop technology, our services, and our branding, we do not want to wage a price war. I would say that the past few years have shown that our strategy has been a right one, we will continue to make new strategies and continue to work hard, I believe that GeelyÃ¢s future will be better and better, stronger and stronger. I believe that Geely will go far and will continue to developÂ and will continue to develop on the inside and out.
Sohu: Â At the same time, Im also interested to know how you manage two companies, how do you separate them in your daily life?
LSF: I have to say that both companies have a really strong management structure, Volvo has VolvoÃ¢s, GeelyÃ¢s has Geelys. Volvo is Volvo, Geely is Geely. Both companies have a brotherly relationship, they donÃ¢t meddle in each otherÃ¢s affairs. Speaking from my own point of view, my main task is to support both companies, I need to understand everybodyÃ¢s jobs, understand VolvoÃ¢s management structure and at the same understand GeelyÃ¢s, my job is to understand not to mess with. How much time I spend with each company I am not too sure, but it works out as even at the end of the day.
The interview originally appeared on Sohu last week and we have translated the major parts of it, some parts such as Volvos relationship to classical Chinese studies we have left out as it is not entirely relevant or interesting to the Western reader. Special thanks to Dr. Jeff Wu for help in translating some of the harder paragraphs and of course Wang Hui Fang for carrying out the interview.