Sept. 10 (Bloomberg) -- Li Shufu, the billionaire founder of China’s biggest private automaker, is leading a push among the country’s carmakers for overseas brands to move beyond the world’s fastest-growing car market.

Li’s Geely Holdings Group Co. said this week it may work with Chinese state investment companies to buy Ford Motor Co.’s Volvo unit. Beijing Automotive Industry Holdings Co. joined a bid for General Motors Co.’s Saab yesterday and Sichuan Tengzhong Heavy Industrial Machinery Co. is trying to buy GM’s Hummer.

The acquisitions would give Geely and Beijing Auto entry into the U.S. and Europe, where Sweden-based Volvo and Saab have reputations for safety. The Chinese companies would also face the challenge of profitably building cars in relatively small volumes, a feat that eluded GM and Ford.

“It takes decades to establish a recognized, renowned brand,” said Jim Hossack, an industry analyst at researcher AutoPacific Inc., in Tustin, California. “China wants to do it much faster, perhaps within as little as five years.”

Geely has a target of getting 66 percent of sales from overseas by 2015 compared with 5 percent in the first half. In June, Geely also bought the key assets of bankrupt Australian gearbox maker Drivetrain Systems International to help add larger and more sophisticated models to its product line-up.

Geely Automobile Holdings Ltd., Geely Group’s listed unit, fell 1.9 percent to close at HK$2.07 in Hong Kong. The stock has more than tripled this year.

Fighting for Rice Bowls

“I’m fighting for what’s in overseas automakers’ rice bowls” instead of their leftovers, Li, 46, said. “I want to build Geely into a global first-tier automaker.”

For Beijing Auto, the bid for Saab marks a second attempt to buy a European carmaker. It was rebuffed by GM in July when it bid for the Ruesselsheim, Germany-based Opel unit.

GM decided to dispose of Saab in February as part of a European reorganization. The Swedish unit has been unprofitable for most of the two decades that Detroit-based GM has owned it. Saab sold fewer than 100,000 vehicles worldwide last year.

“This is a great opportunity for us to partner up with a brand Saab that we believe has a great future with a new business plan and new ownership,” Wang Dazong, general manager of Beijing Auto, said in a statement posted on its Web site.

Chinese carmakers have failed in their ambitions before. In January, 2006, Geely’s Li displayed the 7151CK sedan at the Detroit car show and promised the car would be on U.S. roads by 2008. The exports never came. Chery Automobile Co., China’s largest maker of own-brand cars, has also delayed plans to enter developed markets.

SAIC’s Failure

SAIC Motor Corp., China’s biggest domestic automaker, bought control of South Korea’s Ssangyong Motor Co., only to have the unit go into receivership after SUV sales plunged. Tengzhong’s application to buy GM’s Hummer has been sent back, China’s government said this week.

Following a similar strategy as the Chinese carmakers, Tata Motors Ltd., India’s largest truckmaker bought Ford’s U.K.-based Jaguar and Land Rover brands last year. Sales of luxury vehicles plunged due to the global recession and the units had a pretax loss of 281 million pounds ($465 million) in the 10-month period ending March.

Disadvantages

“There are more disadvantages than benefits for Geely to buy Volvo,” said Lin Huaibin, a Shanghai-based analyst at IHS Global Insight. “They don’t have the capability to manage an international company nor the experience to deal with unions overseas.”

Geely earlier this year unveiled the EC718 sedan, its first model specifically designed for European markets. The car, priced from 80,000 yuan ($11,700) to 120,000 yuan domestically, still needs to win certification to be sold in Europe. Geely has also bought a stake in Manganese Bronze Holdings Plc and set up a Shanghai venture with the London-cab maker that is shipping cars to countries including Saudi Arabia, Turkey and Spain.

“We aren’t afraid of the financial crisis,” Geely Vice President Zhao Fuquan said. “On the contrary, we hope it will penetrate even further as it has provided us with some opportunities.”

Beijing Auto has joined with the sportscar maker Koenigsegg Group to bid for Saab. The company would retain production in Sweden, while it may follow other automakers in building assembly lines or starting partial production in China to avoid tariffs on imported vehicles, Koenigsegg’s founder Christian von Koenigsegg said. Saab’s Trollhaettan plant’s production capacity is 200,000 cars a year, he said.

Domestic Competition

Chinese automakers plan exports as rising competition from Hyundai Motor Co., GM and Volkswagen erodes the benefits of surging demand at home. Industrywide profit fell 9.9 percent in the first five months even as vehicle sales jumped 14 percent.

Chinese owners may be able to succeed where U.S. automakers failed if they can successfully move most production to China to cut costs and still maintain quality, according to AutoPacific’s Hossack.

“They’ll need to keep design and engineering and perhaps a portion of production in Sweden,” Hossack said. “They could export the bulk from China.”

Volvo, the maker of S80 sedans and C70 coupes, was once central to Ford’s push to reap a third of its profits from luxury autos. The S80 is one of the six safest large luxury cars, according to U.S. Insurance Institute for Highway Safety.

“We have no concerns about quality,” said Lawrence Ang Executive Director of Geely Automobile. “The real obstacles for exports to Europe and other developed markets are a lack of brand recognition and building up sales and maintenance networks.”

--Tian Ying and Stephanie Wong, with assistance from Alan Ohnsman in Los Angeles. Editors: Bret Okeson, Neil Denslow.

To contact Bloomberg News staff for this story: Tian Ying in Beijing at +86-10-6649-7571 or ytian@bloomberg.net

Last Updated: September 10, 2009 05:29 EDT