For example, SAIC’s recent acquisition of Ssangyong was fraught with difficulty. The two companies had “different dreams” in terms of what they wanted out of a partnership, and they were not successful. SAIC was: unable to secure concessions from Ssangyong’s labor union to lower costs, unwilling to inject billons of RMB incremental capital to fund the business, and unable to manage the loss of leadership at Ssangyong. Ultimately, SAIC decided to dissolve the deal.
One of the most famous cases was the failed 9-year marriage of Daimler-Benz and Chrysler. Announced to the world in 1998 as a $38 billion “merger of equals”, the deal was ultimately dissolved in 2007.
Sharing the Same Bed, Having Different Dreams
We are witnessing a historic period in the development of the global automotive industry. The global financial crisis has dramatically weakened the “triad” markets (Western Europe, North America and Japan), and has highlighted the resilience of the emerging markets, led by China. The resultant economic “imbalance” creates opportunities for structural realignment of the industry as assets shift to the higher growth markets.
Clearly there is a need, on the part of the European and North American vehicle manufacturers and suppliers, to find additional sources of funding in order to keep their operations going, while the rapid growth of China’s auto market in recent years has provided Chinese companies with more capacity to invest. However, there are real challenges in making cross-border deals work.
2. Brand Tension:
1. Juergen Schrempp was seeking to build scale and elevate the prominence of the automotive business in the Daimler-Benz portfolio of companies. Bob Eaton was seeking to expand Chrysler’s global reach beyond its core North American market. While on the surface it appeared compatible, this vision lacked sufficient top-down direction needed to build a globally integrated automotive enterprise. Strategic Mis-Alignment: While each company had a sound rationale for partnership, there was a lack of alignment between the architects of the deal and the organizations they led. The target for achieving “synergy” resulting from achievement of a cost-savings target became the sole objective of the post-merger integration team, and meaningful integration of the core automotive business was never established as a concrete target.


It should be noted that the Volvo acquisition is not Geely’s first cross-border deal. In 2006, Geely partnered with Manganese Bronze to produce components for and assemble London Taxi vehicles. On March 17, 2010 Geely announced plans to become the majority shareholder of Manganese Bronze. In May 2009, Geely acquired the Australian gearbox maker Drivetrain Systems International.
The causes of failure for this deal are noteworthy:


Lessons Learned from Failed Automotive Marriages
Geely is clearly using an “inorganic” approach to accelerate its development and to improve its ability to compete in the China auto market. The learning applied here could also accelerate its emergence as a global automotive player. However, it is well known that cross-border deals rarely deliver on their initial promise.
Zhejiang Geely Automotive Group's $1.8 billion acquisition of Volvo from Ford represents the most ambitious action to date for a Chinese vehicle manufacturer to accelerate the process of transforming into a global automotive player. Li Shufu has described the deal as the “poor boy from the countryside” (Geely) marrying the “rich girl from the city” (Volvo). Like all wedding ceremonies, Sunday’s deal signing in Gothenburg, Sweden could be described as a celebration of hope and love for the newlyweds.
Even the more successful partnerships have had mixed results: by all measures, the Ford alliance with Mazda has been a very good example of a successful cross-border alliance. Ford benefited from access to Mazda’s fuel-efficient technologies and platforms, and both sides benefited from a shared global production and distribution footprint. However, Ford recently made the decision to liquidate its shares in Mazda in order to raise much-needed cash.
It is a marriage of two automotive companies with very dissimilar backgrounds and histories. I have already commented about the sound industrial logic for this deal in my article Ford’s Sale of Volvo to Geely Benefits All Parties , however this only provides the foundation. The Chinese describe partners with different agendas as “sharing the same bed, but having different dreams”. Building a successful partnership between Volvo and Geely will require a solid plan for post-acquisition integration.