Monday, March 29, 2010

The Earth Moves A Little

Over the past weekend Ford and Geely inked the deal that would transfer ownership of the last brand of Ford's famed PAG (Premier Automotive Group) to a new owner. Having divested itself of Jaguar, Land Rover, Aston-Martin, Ford can now complete Alan Mullaly's vision of returning to the company's core brands. A wise move? I have some concerns.

Volvo was indeed a brand in need of some new direction and products. Volvo's were in the past "safe" cars. But all cars now are "safe" cars, so that niche has been eliminated. Volvo, in my opinion, could have been transformed into a very staunch environmental brand with hybrid technologies, efficient manufacturing and products with high recycling content. It would have been a good fit with their traditional customer base and a unique product in the Ford lineup.

The Chinese are coming. They will be here. Not personally, but they will be sending their cars over here. We have all their other products, but why have they not been sending the cars over. Well two reasons. I suspect the first is the patent infringements in their existing products, and second safety.

I've said it before and it's well known that China does not respect intellectual property rights. As soon as they lay one foot on the shore here with a US operation, it's going to be a field day in the courts. Next though, we are different consumer then we were forty years ago. We like seeing our vehicles hitting fixed objects on commercials to see how well they hold up in a crash. Europeans like to watch the same thing too. So far, Chinese cars don't hold up at all during a crash. Search on YouTube for a video of the Brilliance during European crash testing. The European distributor of the Brilliance has folded up shop. They are not quite ready for prime time.

That is about to change. With the acquisition of Volvo, Geely has the missing link to one of the pieces of the puzzle. They also have a foot in the door to solving the second one too. Clearly Volvo will be looking at their current product line up and finding engineering solutions to bring their product line up to current safety standards. Volvo has an highly competent engineering department that will be leveraged to make their vehicles safe to export to other countries. Geely has also licensed Ford technologies as well, therefore some of the pieces they need to build their vehicles will no longer violate intellectual property laws.

Has Ford lowered the drawbridge to let the Chinese enter our kingdom? Most likely yes. But as Toyota has found out recently, this kingdom can be a not so friendly place.

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