The influence of Financial Crisis

--Apply to Volvo

i. The plan

We plan to write a review of the impact of financial crisis in China and

Sweden. China and Sweden are two very different countries and located on
two different continents, two governments have very different ideas. China
does not have a big credit crisis as Europe and America but instead the
appreciation in RMB and the huge decline in out-port make Chinese
government worries. On the other hand, Sweden has his own experiences
which learn from 1990 Financial Crisis. The Swedish way is asking banks
to write down losses and issue warrens to government in order to get the
money back in the future for the tax payer.
We apply the case Geely Bought Volvo. The Volvo-Geely deal is a hot topic
in China and Sweden. If Geely make a good use of Volvo, It will bring
prospective prosperity for Volvo and at the same time lead the biggest car
producing country China to the global market. However, if it goes the other
way, Volvo might loss his good reputation on safety and environmental
friendly; Geely will face bankruptcy because three fourths of his investment
is borrowed money from both China and other international communities.
So far, two previous cases of Chinese carmakers buy an international
famous auto company end in failure. But Chinese government strongly
supports Geely and Volvo unions favor this agreement.

ii. The problem

How does the financial crisis influence Sweden and China and what are
those different policy the two countries take?
Focus on Chinese carmaker Geely bought Volvo from Ford. The gain and
lose on the Volvo deal in both countries.
Discuss the future prospective on this deal and between two countries.

iii. The literature

Literatures about previous Financial Crisis in China

The financial crisis in Sweden during 1990-1994
Previous international deals between carmakers  
http://fcic.gov/

iv. The aim of the thesis

 What does the financial crisis influence China and Sweden. In the case of
the gain and lose in Volvo deal for both Volvo and Geely.

v. The methodology

This will be a theoretical thesis. We will use data and listed figures to
illustrate and compare the economical situation under the financial crisis
between the two countries in different prospect.

vi. The structure

 What The Financial Crisis did to China and Sweden?

Selected Financial Market & Economic Data:
Financial Sector (The changing stock market and the financial services and
insurance as a percentage of GDP),
Labor sector (the changes of unemployment rate),
Housing market (The housing bubble or regression of the housing market),
Business sector (The influence of companies and the inflation rate)

 The purchases and sales involve two countries: Volvo; chances and
challenges under the financial crisis time.
Ford and Volvo
Because of the financial crisis hit the auto industry, Ford cannot afford to lose
as much as 43 million a year on Volvo. Ford sold Volvo to Geely is because
one hand Geely will be a responsible owner and on the other hand, Ford
would not have Volvo as a strong competitor in Europe and American market.

Geely and Volvo

Why Geely choose to spend 1.8 billion to buy Volvo?
The impact of Geely brand building, obtain the Volvo market network and
development both the domestic and global market. The Volvo deal is
supported by Chinese government.
Geely also faces challenges including the financial risks, the money Geely is
going to spend on construction, huge cultural difference and operation
difficulties.

What dose Volvo gain in this purchase?

The changing owner of Volvo to Geely can open the out growing Asian,
especially the world`s biggest Chinese auto market and the huge production
promised by Geely in the future may stop the sale decline in two or three
years and end the continue losses of Volvo.
There are also downsides. Geely is a small and young carmaker compare to
Volvo, it may lack of experience and technique to manage Volvo.

 What do the different country politics actions and policies between two
countries do to the financial crisis?
Policy differences
Chinese government mainly focus in three ways: stimulate the exports,
expand the domestic demand and monetary policy including central bank
raised interest rates five times, raising the deposit ratio eight times and out a
large amount of money in the market.
Swedish central bank cut interest rate twice, the government guarantee the
deposits and loans.
Market differences
Both countries rely very much on ex-port. China has her ex-port most in
processing industry field while Sweden ex-port communication, environmental
protection technique and so on.
Currency
The currency changes including depreciation of Swedish kronor, the
appreciation of RMB and the inflation in both countries.

Under the uncertainty, the future prospective on the Volvo deal

The fast growing Chinese auto market (more than 15 billion a year) is a great
opportunity for both Volvo and Geely but also with great challenge.