It was a miserable winter day in January 2007, the kind that makes auto executives in the Motor City wonder why they hold the Detroit Auto Show at the most inhospitable time of the year. Li Shufu, a farmer's son from China's Zhejiang province who last week become the unlikely chairman of Volvo Cars, was looking for some cheer from Ford Motor Co's finance chief Don Leclair in his office at Ford's glass-sheathed headquarters. A year earlier, a new model made by his company Geely, which means auspicious in Mandarin, had made an unfortunate debut at the Detroit show. This was despite a sticker price of less than $10,000 that was meant to make it the “VW Bug” of this century. Unable to get space in the main hall, Geely Automobile Holdings parked its homely sedan in the lobby of Cobo Hall, where it looked forlorn during the black tie gala. The chrome lettering on the drably named MR7171A model on display had been unevenly applied, the tires were dirty and only partly inflated, and the interior was heavy on plastic. Li, now 47, had succeeded in China by marketing “the world's cheapest car” to an emerging middle class in the country's inland cities. But his Geely model was mercilessly panned in America. You get what you pay for, people said. “I just remember engineers from the other car companies coming to look at the Geely, peer under the hood and then walk off holding their noses,” said John Harmer, a former California politician who was a consultant to Li's aborted attempt to crack into the US market on his own. Li abruptly abandoned plans to take the US market by storm with his people's car after that fiasco. Leclair, a lifelong veteran of Ford's finance operations, took that first meeting with Li in January 2007, freezing rain pounding against the office windows at One American Road in Dearborn, a Detroit suburb, as a courtesy call. His focus for months had been trying to stop the staggering cash burn at Ford. Weeks after Li's visit, he would announce Ford had lost $12.6 billion in 2006 and would cut almost 44,000 workers. The Geely visit, people involved in the preparations say, barely hit the radar for Ford's senior management. Li, on the other hand, was excited, though the meeting never got beyond polite generalities. “I was surprised he had left it at that, but Chinese business culture and American business culture are very different,” Harmer said. “In China, it's important first to make a connection.” By the time the next Detroit auto show rolled around, Li, who had started Zhejiang Geely Holding Group as a refrigerator parts-maker with a loan from his father in 1986, was no longer dreaming about taking America by storm with the cheapest car on the market. Now his ambition was to have a renowned luxury brand in the stable of one of China's biggest private automaker. Thus began a roller-coaster journey ending with Li's purchase of Volvo Cars from Ford, and crowned this month by his appointment as chairman of the Swedish auto icon. It is the biggest acquisition of an international auto marque by a Chinese enterprise and will be scrutinised closely in the months to come for how it pans out. China's track record in acquiring international brands has been mixed at best, particularly in the auto industry. State-owned SAIC Motor Corp's takeover of South Korea's Ssangyong Motor ended with Ssangyong in receivership. Chinese officials this year squelched plans by a little-known machinery maker to buy the Hummer from GM. China's attempts at piggy-backing on a big brand name have stumbled badly over issues of management, marketing, use of technology, dealing with unions, and cultural integration. Assuming approval by China's regulators, Geely faces an additional challenge of turning around a company with an expensive cost base and with a stodgy image as a maker of safe but boring cars. “Geely is going to have to ask why Volvo wasn't successful in the past and what it will take to make it successful now,” said John Bonnell, senior director of strategic advisory services for J.D. Power Asia Pacific. “To buy the company and keep the same structure and not make any changes -- well, you're going to have to change something in the equation to get the results you want.” Ford had tried without much success to change some equations at Volvo. So when Li and Leclair met for a second time during the 2008 Detroit show, the finance chief was intrigued when the cherub-cheeked Chinese billionaire made an offer for Volvo.
