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Li Shufu: An engineer with a mind for poetry and motion

Filed under: The Executives |

Li Shufu guffaws. The Chinese billionaire – viewed by some as his country’s answer to Henry Ford – executed one of corporate China’s most daring overseas raids when he bought Volvo Cars in 2010 from Ford.

But the chairman of Zhejiang Geely as well as Volvo made his start in business in much more humble circumstances. He points at the FT’s photographer clicking away in this anonymous meeting room in a Brussels hotel and says: “My first starting point was as a photographer. Of course, without such a sophisticated piece of machinery.”

He soon showed his entrepreneurial streak, setting up his own studio after his father gave him about Rmb100 ($16). But his “very cheap camera” was no longer any good. So Mr Li built his own “rather professional camera” as well as all the lighting, furniture and backdrops in the studio.

That mixture of engineering and entrepreneurial drive has propelled the 50-year-old Mr Li to become one of the figureheads of private Chinese industry. Geely was the first non-state-owned carmaker when it began in 1997, and had revenues of Rmb29bn ($4.7bn) last year (Volvo had sales of SKr122bn, or $19bn). Questions still remain as to whether his bold purchase of the Swedish carmaker will pay off.

But for Mr Li – who also owns Manganese Bronze, the maker of black London taxis – the journey to being a carmaker was a long one. After photography, he made his initial foray into industry, and a familiar pattern soon established itself.

First, he spots an opportunity from a previous experience: in this case, the extraction of silver and gold from abandoned machinery, drawing on the knowledge he gained from developing photographs.

The jovial Mr Li – who writes poems in his spare time – is laughing again as he explains how increased competition in this niche forced him to move on. “Getting silver and gold out of junk machinery was quick to be learnt by others,” he says, speaking through a translator.

The story soon repeated itself in a new industry. Aged 23, he moved on to designing and manufacturing parts for fridges and soon was making the entire appliance. He set up a company called Geely, similar to the Chinese word for “lucky”. To more chuckles, he recalls how the entry of more local players into this market drove him out again. The Chinese are “quick learners and quick followers”.

Due to these setbacks, as well as the Tiananmen Square massacre in 1989, Mr Li decided “maybe it is a good time to have a break” and handed his business over to the local government, before heading to university.

Several years of studies did little to alter the cycle of Mr Li’s businesses: early adoption, a rash of copiers, a move into new territory. So it proved with a construction business, part of which he still owns today.

Then, in 1993, he launched the first private Chinese company to make motorcycles. “Again: very popular, very successful and a lot who follow,” he says, adding that some of the competition became “vicious in nature”.

His final leap was into the car business. Mr Li, dressed in a blue suit with a Geely badge on his lapel, explains the attraction: “I believe the auto business is a highly comprehensive and complicated business. It’s not that easy for people simply to enter and ruin the whole thing.”

From the beginning he planned for the long term. “I believe the auto industry is a competition of human resources, competition of funding, competition of technology and the competition is international. So the key in all these [things] is people.” So he set up a university and technical schools to “supply the production base that we are establishing”.

But its early cars were far from a success. Despite rolling off the production line on August 8 – the luckiest day of the year in China – in 1998, the cars were so “rudimentary” Mr Li refused to sell them. “We scrapped them all and OK, that’s not good enough,” he says.

A second batch was scrapped too, and a third was “very unsatisfactory”. Similarly, a second factory in Ningbo in 2000 produced “very poor product, poor quality”.

The turning point came about through China’s application to join the World Trade Organisation and its concomitant promise to open up its industries. Mr Li no longer had to sub-license car design and production from another company, he could now do it himself. The Free Cruiser, based on a design by South Korea’s Daewoo, was started in 2002 and became one of the first Chinese cars to be displayed at an international show.

In a demonstration of his self-confidence, Mr Li says he was already thinking about Volvo in 2002 – even without having had a successful model himself. Citing his “gut feeling”, he says: “I just felt that with Ford owning all these brands, at some point it could give us an opportunity to get one of them, and Volvo was my favourite.”

It took eight years for his dream to come to fruition and even now some in the industry wonder if he has bitten off more than he can chew. “Volvo isn’t in the same league as BMW, Audi or Mercedes. I wonder if a Chinese carmaker can really turn it round,” says one German executive.

Hakan Samuelsson, Volvo’s chief executive, says the Swedish group has prospered under Geely’s ownership thanks to the stability and investments it has brought. “We have a very good relationship,” he says of Mr Li. “He also jkjplays his role professionally: he has no ambition to micromanage this company.”

For his part, Mr Li says that any doubt of the wisdom of such a big Chinese acquisition overseas is “evaporating”. Instead, he says the biggest pressure is in increasing Geely’s and Volvo’s combined competitiveness.

Mr Li is far from uncritical of Volvo. He believes there is much more the Swedish group could do in communication and marketing, particularly of its vaunted reputation for safety, a big asset in China. Mr Samuelsson’s predecessor as chief executive was abruptly ejected amid boardroom disputes. Reports of tensions persist, particularly over how to adapt Volvo’s somewhat staid image to the showy tastes of Chinese consumers.

Mr Li himself hints at this, saying: “Because of a lapse of investment in product development over the years in previous ownership, we do see a reflection of lack of modernisation of Scandinavian design.” But he quickly adds that the first new model developed with Geely’s money – the latest version of the XC90 SUV, out later this year – will offer the requisite modern take.

Talking about Volvo’s brand and what he sees as its respect for the environment and human beings, he stresses that his investment is for the long term. The brand’s image is in tune with the way in which the world is developing, he argues.

“Particularly in China, I think a lot of people start to realise: OK, what are the things that they truly should value? That’s something that fits perfectly well with what Volvo is offering.”

                              Culled from FT

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