Volvo Goes to China: Will Its Tradition of Safety Go With It?

Last Updated Mar 29, 2010 10:34 AM EDT

The critical question as the Zhejiang Geely Holding Group goes ahead with its planned $1.8 billion ($1.6 billion cash) acquisition of Sweden's venerable Volvo brand is this: Will the Chinese parent company respect Volvo's hard-earned traditions, especially as a safety pioneer?

Safety does sell, so Geely would do well to leave well enough alone. According to Alan Adler, a General Motors safety spokesman, "Our own internal data shows consumers rank safety very highly. We know that safety sells, and customers are increasingly looking at the rankings from NHTSA and the Insurance Institute for Highway Safety."

And the 2010 Car Brand Perceptions Survey from Consumer Reports puts safety as the most important consideration in buying a new car. Sixty-four percent put it in their top three considerations, making it the most important factor in 2010 (it rated similarly in 2009).

Volvo executives, speaking off the record, told me they've received assurances from Geely that they can run their own show, and that the Chinese bosses understand the rich history of the property they're acquiring. The company dates back to 1927, and the founders, Assar Gabrielsson and Gustaf Larson, said at the time, "Cars are driven by people--the guiding principle behind everything we make at Volvo, therefore, is and must remain--safety."

Volvo successfully capitalized on its safety image with a series of effective ads that featured suburban parents looking out at a stormy night and saying to their teenager, "Here, son, take the Volvo."

Volvo introduced the safety cage and the laminated windshield on the PV444 in the 1940s, the first three-point seatbelt on the 122S in 1959 (I have one in the garage with those clip-on belts), and front disc brakes (also on the 122S) in 1964. The company also pioneered rear-facing child-safety seats (debuting in 1972) and pioneered its own Road Traffic Accident Research Team (launched in 1970 and still in operation).

Volvos had side airbags in 1994, and dynamic stability assistance in 1995. By the late '90s, owners were protected against rollover and whiplash.

Chinese automakers are dogged by safety concerns, which is one reason none have been marketed in the U.S. (though some forthcoming electric cars, such as the Wheego and Coda, use Chinese cars as a base).

Geely says it will keep Volvo's manufacturing bases in Sweden and Belgium, but it might also look into making cars in China, a prospect that could be alarming, given repeated recalls of Chinese products in recent years.

As CBS News put it, "Volvo dealers in the U.S. said Sunday that Geely's assurance that the cars will still be made in Sweden has allayed customers' concerns about quality control. Chinese automakers seeking to expand into U.S. markets have faced quality questions from consumers concerned about defects and problems with a number of Chinese exports ranging from drugs and foods to furniture and appliances."

China is now producing more cars than the U.S. (13.79 million in 2009, compared to about 10 million here), but it is still not building cars to international standards. The government wants to change that. According to Auto Evolution, the Chinese Ministry of Information and Technology released an advisory earlier this month "urging the country's carmakers to develop a nationwide quality standard in order to improve the quality management process." Automakers were also urged to improve their service departments--and develop a better system for handling recalls.

"Maybe this is partly about China buying its way into a higher quality production process and product," said Paul Midler, author of the recent book Poorly Made in China.

Geely is getting a relative bargain, by the way. Ford paid over three times more, $6.45 billion, for Volvo in 1999. As part of its recent spate of fire sales, Ford also handed off Jaguar and Land Rover to India's Tata Group for $2.3 billion in 2009.

Photo: Jim Motavalli