Li Shufu, Chairman of Volvo owner Geely
A Western European automaker in the hands of Chinese owners? Could that work? Yes, surprisingly well so far. The case in point is the formerly Ford-owned Volvo. In 2010 it was sold to China's Geely Automobile for $ 1.8 billion.
Naturally there were fears about the intentions of Geely's founder and chairman, Li Shufu, but so far he has proven them wrong. Manufacturing hasn't been moved out of Europe. It remains in Gothenburg, Sweden and Ghent, Belgium. Product development has not been moved out either.
On the contrary. After Geely's purchase, Volvo successfully separated its PLM solution from Ford's C3PNG and created a new, technologically advanced system. The new system is based on Siemens PLM's Teamcenter/Tecnomatix coupled to a product database and configurator called KDP (Konstuktionsdata Personvagnar). Design is standardized on Dassault Systemes CATIA on the CAD/CAx-side.
As you might expect, there has been investment in China. Volvo has launched manufacturing in China and a Chinese engine plant is almost done. That said, there is also investment in Europe. Today, Volvo's sites for both product development and manufacturing are still located in Europe and Sweden. Adding to the company's European investment in product development is a newly inaugurated joint design center called CEVT (China Euro Vehicle Technology) at Lindholmen in Gothenburg, Sweden.
VERKSTADSFORUM.se's PLM editor, Bo Nyström, recently visited CEVT and met with three Volvo engineers, Jerker Andersson, Vice President Electrical (just returned after three years in China), Erik Gräns, Manager Product Documentation and Release Management, and Anders Werner, Module Team Director CAE (with background in Saab Automobile).
Volvo's XC Coupé Concept car
Their mission is to develop the IT support for the architecture and platforms of Volvo and Geely cars in the "C segment" (the "Golf segment", in Volvo's case, a replacement for the V40 model).
But before we delve into IT, let's set some context with Volvo's global market position and what happened when Ford sold the company.
Ford had to sell Volvo to save itself
"The tone was somber after the Geely purchase", says Nyström. This deal took place in the aftermath of the Lehman Brothers crash in 2008. The automotive industry was in a crisis. Even in the US, companies like Chrysler and GM wouldn't have survived without extensive state aid. Ford sold Volvo because they needed the money to save the rest of the company. Many figured that Volvo's Swedish days were numbered after the divorce from Ford and Geely's purchase: "First in line to disappear would be production, then product development", was the general feeling.
But the engineers at Volvo had a different idea, and took action with the firm belief that the doomsday prophecies didn't necessarily have to come true. They had already started the development of the Drive-E series of engines long before Ford's deal with Geely.
Andreas Westholm, Volvo
"We simply chose to focus on what we could influence and not to put energy into speculation about the deal", said Andreas Westholm, Volvo's IT-/PLM-representative at CEVT. Unlike many others, the engineers were convinced that Geely's chairman and founder, Li Shufu, would not risk lowering the value of the Volvo brand by moving the company out of Sweden. And with the Drive-E concept they showed in practice what they could do.
So, for now the alarmists seem to be wrong, "Volvo is not about to leave Sweden for China", says Li Shufu, who also claims that he has confidence in the Swedish engineers. The definitive confirmation of this came with the establishment of China Euro Vehicle Technology (CEVT) in Sweden.
Volvo's performance has been far better than analysts expected
Volvo has had its financial ups and downs since the Geely takeover. The global economy has been unstable, which has been reflected in the performance of every global carmaker. However, things have improved lately. The objective for 2014 is to sell 450 000 cars, but the long-term goal is to reach the 800 000 level by 2020. That's a tough, but not impossible goal in light of the expanding Chinese market. Right now the revenue curve is pointing in the right direction.
Håkan Samuelsson, VCC President
Volvo's President, Håkan Samuelsson, presented an operating profit for the year 2013 at close to $ 310 million, far above analyst expectations. "We're moving in the right direction and at a slightly faster pace than we anticipated. Things are going particularly well in China and decently in Europe, in light of the current market condition. Now we have focus on the US market, where things are still relatively sluggish", Samuelsson said.
When it comes to the strategy for the different vehicle segments, Samuelson's predecessor, Stefan Jacoby, took aim at dominant German car makers like Audi, BMW and Mercedes. "Of course it's right to aim for the stars, even if you only reach the treetops", Bo Nyström commented, and treetops is a good metaphor for what Samuelsson has reached after a brisk organizational approach, combined with the development of a new architecture for the "big" cars; SPA (Scalable Platform Architecture), a new 4-cylinder engine range, VEA (Volvo Engine Architecture) and the establishment of production in China.
"The industry's best engines"
Jerker Andersson, Erik Gräns and Anders Werner are not surprised by the success. They claim that since the introduction of Drive-E concept Volvo is on the right path and that "VEA engines" are counted among the automotive industry's absolute best.
Volvo engineers Erik Gräns, Anders Werner and Jerker Andersson
"But engine development is not a CEVT's mandate - Aren't they developed by the Volvo Powertrain Unit?
"The fact that we get the engines from Volvo Cars' Powertrain unit does not mean that we see and deal with them as black boxes. Electricity, electronics and software has to be integrated and functioning at the interface between the engine, car and driver. And to ensure this we simulate and calculate each feature separately, over and over again", said Jerker Andersson of the CEVT team.
What does the IT environment at CEVT currently look like? Do you run Catia V5 CAD/CAx and Teamcenter PDM / PLM like Volvo Cars?
"Taking advantage of Volvo Car's experiences in the PLM area is critical to our collaboration, so yes, we use Catia V5 CAD and Teamcenter PDM", said Andersson.
And Teamcenter connects to Volvo Car's KDP product database and configurator?
"No, we do not use the KDP, but rely entirely on Teamcenter for distribution", said Gräns.
Much of the work at CEVT is "systems engineering", which requires a lot of calculation and simulation. What tools do you use for this?
"That's right. We work with simulation-driven product development, and we use ANSA, LS Dyna, MSC Nastran and Adams in addition to Fluent and Open Foam", said Anders Werner.
"To this list we can add Matlab, Simulink and Mentor Graphics, as well as our backbone for electricity and electronics, Elektra, all compliant with AUTOSAR 4.0 (automobile industry standardization initiative), added Jerker Andersson.
Does CEVT run its own HPC (High Performance Computing) cluster?
"We do, but we also purchase some capacity from HPC specialist, Gridcore", said Werner.
The quickest PLM implementation ever
According to Siemens PLM's Hans Richmond, Key Account manager for Volvo Cars and CEVT, the following Teamcenter modules are up and running at CEVT:
- "Teamcenter Author (Vault, Variants, Change, Workflow, etc.)
- Product Configuration , Classification, Part Management , Visualization (the Virtual Mock -Up) Integration for Catia, Clearance Calculation, Simulation and Requirements – in other words most of it.
Richmond added that CEVT's PLM implementation is probably, "Sweden's quickest ever". From the project inception in August 2013 until the start of operations in September, two days before the opening ceremony, took just six weeks".
Speaking of the communication between CEVT and Volvo, Andreas Westholm said, "Everything that comes to us from CEVT is stored in KDP and Teamcenter. What is important for us is not how the information is handled internally at CEVT, but that it can be transferred effortlessly to us at Volvo Cars."
Scandinavian minimalistic design versus Chinese nouveau riche
This cooperation between Li Shufu and Volvo hasn't been all smooth sailing on all fronts. The collision between the Scandinavian design language, which is characterized by minimalism, does not always gel with the Chinese nouveau riche style. Li Shu Fu wants bigger, more luxurious cars. How Volvo's engineers will cope with this remains to be seen.
But one thing is clear - the IT department will remain in Swedish hands.