How China's 36th-best car company saved Volvo

[Ulquiorra]

Hakan Samuelsson, the chief executive officer of Volvo Car Group, is sitting in the master bedroom in the home of a suburban Stockholm family he’s never met. His company has rented the modernist three-story house of blond wood and whitewashed walls for the media introduction of Volvo’s new station wagon, the V60.

Alternating groups of American, British, German, and Scandinavian journalists crowd in for short question-and-answer sessions. It’s Samuelsson’s first and probably last bedroom interview, but he plays along. “You can lie down and relax,” he tells reporters, gesturing to the queen-size bed as a grin creases his craggy face.

Outside, light February snow flutters past willows and pines onto a silver V60 bathed in camera lights in the driveway. It was designed, like so many Volvos, for suburban families seeking safe, reliable transportation. But the peculiar setting for this press event is meant to suggest that today’s Volvo is a far cry from the Volvo of a decade ago, when it was losing money, selling fewer cars by the year, and watching its talent for design and engineering get watered down by then-owner Ford Motor Co. Even the staid wagon, the embodiment of classic Volvo, has taken on a new look in the sleek, low V60. A Gear Patrol review called it—remember, this is a station wagon—“positively lust-worthy.”

The car wouldn’t exist, and Samuelsson wouldn’t be jawing with journalists in a stranger’s house, if it weren’t for a formerly obscure Chinese billionaire named Li Shufu. For a long time, Li was known mostly for building crappy little cars for Chinese consumers buying their first vehicles. In 2010, his Zhejiang Geely Holding Group Co. bought Volvo from Ford at a fire-sale price. Samuelsson became CEO in 2012, and since then Volvo has built an engine plant and two vehicle assembly factories in China, plus another assembly facility in South Carolina, while expanding research and development centers in Sweden and California. By the end of this year the company will have introduced nine models, essentially replacing its entire product lineup. For 2017, Volvo reported sales of 571,577 vehicles and operating profit of $1.76 billion—both records for the 91-year-old company—with revenue of $26.3 billion. Volvo recently selected Citigroup Inc., Goldman Sachs Group Inc., and Morgan Stanley for advice on a potential initial public offering seeking a valuation of as much as $30 billion.

Failed marriages litter the auto industry: Daimler and Chrysler, General Motors and Saab, Ford and Jaguar. This one appears to be working. And Li has pulled it off by both defying the stereotype of the meddlesome new owner and leaving his fingerprints all over Volvo’s transformation. Somehow, Volvo is still the Swedish brand that makes station wagons and prides itself on safety, yet at Li’s prodding, it has also become a leader in emerging technologies, taking on challenges that companies its size usually leave to GM and Toyota Motor Corp.

It’s part of Li’s grander plan to build China’s first global automotive company. In the past year, through various Geely enterprises, he has accumulated a 9.7 percent stake in Germany’s Daimler AG, maker of Mercedes-Benz, as well as 51 percent of British sports car maker Lotus Cars and 49.9 percent of Malaysia’s Proton Holdings. Zhejiang Geely also invested $3.3 billion in Volvo AB, the truckmaker formerly affiliated with Volvo Cars, and acquired flying-car aspirant Terrafugia. Li’s adventures appear to have the tacit approval of the Chinese government, despite his being a private operator vying against China’s many state-owned companies. He declined to answer questions for this story.

As the most evolved piece of Li’s vision, Volvo offers the clearest indication of how he might achieve it. “He gave us balls again,” says Lex Kerssemakers, a top Volvo executive under both Ford and Geely. “It’s not that they came with a bag of money; actually the opposite. The entire turnaround of Volvo has been financed by Volvo’s cash flow. They left us alone and had the patience as an investor not to take our money but to reinvest it in a new product portfolio. We were close to being dead in 2010. And here we are.”

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“Please beware alligators,” says the green-and-white sign on a freshly paved road leading to America’s newest auto assembly plant, 40 miles northwest of Charleston, S.C. “Do not feed wildlife.”

The complex, surrounded by swamp and forest, is Volvo’s first to build vehicles in the U.S. Later this year it will start producing S60 sedans for sale in the U.S. and eventually for export to China and other markets. In a few years the plant is expected to be expanded to allow for the production of XC90 SUVs, which would boost annual production capacity to 150,000 vehicles and double the number of workers to almost 4,000.

Overseeing the project is Katarina Fjording, Volvo’s vice president of manufacturing and logistics for the Americas. She’s a native of Gothenburg, Sweden, where Volvo is based, and a mechanical engineer who’s been with the company on and off for more than 20 years. She supervised construction of the Volvo assembly and engine plants in China before moving to South Carolina in 2015. Between hiring workers, talking to senators, and conferring with local officials on a new highway interchange, Fjording has found the U.S. trickier than China, where Geely was already making cars and had an established logistics and supplier base.