Volvo Cars

Tensions rise over Volvo's identity under China's Geely, sources say

Chinese owner Li Shufu frustrated with Swedish management over new models, sources say

PUBLISHED : Friday, 17 January, 2014, 3:41pm
UPDATED : Thursday, 07 May, 2015, 2:35pm

The strategic path Volvo Car plans to follow is in question because of discord at the board level between new Chinese ownership and traditional European ways, according to two people familiar with the situation.

The 87-year-old Swedish carmaker, acquired by Zhejiang Geely in 2010, is torn between a desire to hang on to its roots - a focus on safety and Scandinavian understatement in car design - and a desire to turn the cars into large, flashy, high-end vehicles prized by affluent Chinese customers and which would compete head-on with BMW, Mercedes-Benz and Audi, the sources said.

Chinese tycoon Li Shufu, founding owner and chairman of Geely and chairman of Volvo since the takeover, is growing increasingly frustrated with Volvo's management team, many of whom are Swedish and other Europeans, according to a Volvo board member and another person close to the carmaker, both of whom declined to be identified because they are not authorised to speak to the media.

We should not be a copycat. It would not be in line with our … reputation

Volvo executives in Gothenburg, Sweden, believe that Li's strategy poses a huge risk.

The long-simmering discord appears poised to cause further turmoil inside the board of directors, which replaced Volvo's chief executive in October 2012, the sources said.

As the tussle over Volvo's identity drags on, Li and his close advisers are now asking, "Who is Volvo's real boss?" according to the Volvo board member.

The source said Li has been diplomatic in his dealings with management but that he might resort to "more forceful ways" to achieve his goals.

Those methods could include installing people more sympathetic to his vision on Volvo's management team and board, the source said.

A Volvo spokesman denied there is any high-level disagreement within the carmaker.

"There is no disagreement between the board and executive management of Volvo Cars over which models we should produce," said David Ibison, Volvo's head of media relations.

"Instead, we see a company that is demonstrably performing well under Chinese ownership. Volvo Cars is profitable and sales are growing. Allegations of supposed frustration are pure speculation."

Hakan Samuelsson, Volvo's second chief executive since the change to Chinese ownership, said Li is getting the car he is asking for in the next-generation S80, which is being redesigned.

"There is no difference in opinion between chairman Li and me," he said on the sidelines of the Detroit car show this week.

"He is of course chairman of the board and knows exactly our plans and is fully supporting that."

The two sources, however, disagree that Li is fully supportive. A Geely spokesman declined to comment.

To be sure, Li, an entrepreneur who built carmaker Geely from the ground up, is happy with the progress Geely and Volvo have made: the new styling and technologies now being packed into the redesigned XC90 crossover utility vehicle and other key vehicles Volvo will unveil starting this year.

Li, in fact, considers the new direction reflected in those cars a great step forward in making the sober Swedish brand fancier by injecting a BMW-like flair.

That direction was reflected in a "concept" or demonstration vehicle unveiled at the Detroit show on Monday - a three-door hatchback called the Volvo Coupe XC Concept.

Still, that does not mean Li is completely happy. He thinks Volvo management is meeting his desire for a big plush sedan only halfway, according to the knowledgeable individuals.

Particularly resistant to Li's vision are Samuelsson and vice-chairman Hans-Olov Olsson, the sources said. Samuelsson, 62, runs the company day-to-day, while Olsson, 72, runs its board as vice-chairman on Li's behalf.

"Both Hakan and Hans-Olov, they're both very good at manipulating chairman Li in order not to follow his ideas," the board member said.

Samuelsson insists Li should be happy with Volvo's upcoming S80. It is not clear when the redesigned S80 will hit the market, but Samuelsson said on Monday that Volvo has been working to make the current version, the biggest car in Volvo's lineup, bigger and more upscale, and to come up with an even bigger, longer-wheelbase version just for China.

"We should not be a copycat," Samuelsson said. "We will never have cars like the BMW 7-Series and so on. It would not be in line with our brand reputation."