Volvo CE takes a dual-brand approach in China
Volvo Construction Equipment (Volvo CE), a key player in the world's construction equipment industry, acquired 70 percent of Chinese wheel loader maker Shandong Linyi's Lingong Construction Machinery Co (Lingong) in September 2006.
The Swedish company recently said it will double its investment in Lingong to almost $90 million over the next three to four years.
China Daily's Ma Zhenhuan spoke to Keith J Ellis, president of Volvo CE China, about the business, integration of the two firms and its future strategy.
Q: It's been a year since Volvo CE acquired 70 percent of Shandong Lingong. What's your comment on the acquisition and cooperation between the two sides over the past year?
A: At the start of our cooperation with Lingong we identified four important areas: investment and governance; stand-alone business and challenges; and opportunities for synergy and moving forward together.
The investment phase was concerned with all the financial transactions involved in bringing Lingong into the Volvo family. I'm happy to report that the initial investment phase is now complete.
As a result, Volvo is now an equity shareholder in Lingong. We now have a new board, with representation from the senior management of Lingong and Volvo CE. The day-to-day running of the business remains in the hands of the Chinese management team, led by Wang Zhizhong, president and CEO of Lingong.
Since this year the Lingong results are consolidated in our Volvo results. So, from a financial, governance and management point of view, it is very much a part of the Volvo CE family.
The next important phase is to understand what the Lingong management needs in order to support the current business. And secondly, to identify the synergies this investment offers to both Volvo and Lingong.
We have worked very closely with the Lingong management team to clearly understand what they need to support the current business.
Q: What role is LingongChina's fourth largest producer of wheel loaders, playing in Volvo CE's China strategy? How does Lingong's dealer network contribute to Volvo CE's China sales? How does the dual-brand strategy work?
A: Lingong plays a very important role not only for Volvo CE China, but in Volvo CE global strategy. For example, the potential to develop Lingong to become an industrial hub, capable of producing products and components as an integrated part of Volvo's industrial network.
We see real possibilities to generate sales through Volvo's distribution network in select markets such as India, Latin America and Russia.
Volvo has strong distribution throughout the world and we are exploring ways in which we can use this network to Lingong's advantage through dedicated dealerships.
With Lingong, we have added a strong Chinese brand to our family.
Our strategy is to be a dual-brand company, which means we will maintain a distinction between the Volvo and Lingong brands and where possible maximize both market opportunities.
Q: Volvo CE's sales jumped by 24 percent in the second quarter, while its China sales increased 54 percent in the same period. What proportion does China contribute to the company's Asian and global sales?
A: Volvo CE is currently the biggest business area in China of all Volvo companies. We're also getting a contribution from the acquisition of Nissan Diesel in Japan and seeing strong growth in China.
Q: Volvo CE acquired the road development division of US firm Ingersoll Rand (IR) in April this year. How will it integrate and merge this business in China? Any future expansion and acquisition plans in China?
A: IR has not fully integrated into the Volvo CE business globally. In China, we have moved its production from Wuxi in East China's Jiangsu Province to Linyi. The road roll just started production last week in Linyi.
With Lingong and IR joining the CE business, China has become one of the most important strategic markets for us. Currently, we are concentrating and working with Lingong on integration.
(China Daily 11/06/2007 page15)
