At the steering wheel
FRANK LI CFO of the Year – China
When his colleagues enquired why he decided to give up on a promising career in investment banking in New York and instead return to China, Frank Li, chief financial officer at Geely Group, referred to a popular pastime of his colleagues. “I told them, ‘it’s one thing to have front-row tickets at a Broadway Show but at the end of the day you’re still just part of the audience. In China, I get to play on the stage.’”
Following a stint at Shanghai Pudong Development Bank and a few other high-profile corporates, Li joined one of China’s largest automobile makers in 2014 in the role of CFO. Geely Group sold nearly 1.3 million cars in 2016. Nearly 40% of them bear the Volvo brand, which Geely had acquired from Ford in 2012. Although the takeover predates Li’s joining of the company, managing the integration with the Swedish car manufacturer has been a mammoth task that kept Li busy as well. Rather than micro-managing the subsidiary, Geely has pursued a strategy of giving Volvo freedom to develop and operate as management in Stockholm sees fit. At the same time, Volvo has profited from a strong partner in mainland China able to open doors in the growing domestic market.
“The chairman’s view was to see Volvo as an investment, as a valuable asset,” recalls Li. “Running the day-to-day business would have destroyed the unique brand so we kept the local management team. We focused on helping Volvo do business in China.” Annual Volvo sales in China have grown ninefold to 90,000 vehicles since the takeover.
Another high profile acquisition Li had the opportunity to play an active role in soon after he joined the company was the £320 million investment in the London Taxi Company, maker of the iconic London black cabs. Rescued out of administration in 2013, the company lacked the balance sheet to give investors comfort. Its limited market reach within the UK and the emergence of alternatives to traditional cab hailing (Uber launched in 2012 in London) further eroded confidence in the successful turnaround of the company.
A thunderbolt in the capital markets was needed not only to fund the turnaround of the company but, more so, to show Geely shareholders the investment in London Taxi had been a smart move. Pulling off a deal with the cards he had been dealt, though, meant Li had to get creative. His solution was to introduce something the city of London had never encountered before: a green bond.
“The green bond made commercial and political sense because London Taxi on its own has a very weak balance sheet so it had always been the holding company that helped finance it,” explains Li. A green bond, proceeds of which can only be used for environmentally friendly projects, was the perfect match for the new subsidiary’s aspiration to make the next generation of the black cabs all electric. “Our aspiration is for London Taxi to become a global product and the green bond helps promote the product,” adds Li.
Li spent months negotiating the terms of the bond with arrangers and meeting investors during roadshows, often having to explain the concept of a green bond as the city had never seen one before.
Despite the many hurdles – including the weak asset base of the borrower, the ongoing government debt crisis in Europe, an unfamiliar parent and an even less familiar type of security – London Taxi pulled off a US$400 million green bond in May 2016. The final paper included a standby letter of credit by Bank of China, another novelty for the city. Testament in large part to Li’s perseverance and ability to get investors to see potential in the issuer, the bond was 6x oversubscribed, allowing London Taxi to raise the money at a coupon of just 2.75%. Along with further investments committed by the parent, a new manufacturing site for black cabs is currently under construction in Coventry, north of London.
Li recently added another dimension to his role as CFO, having been tasked to steer Geely Group’s portfolio of venture-capital-like investments. Already, Geely is working with third parties as well as Volvo to meet changing customer needs. “The car has pretty much been the same thing for a hundred years, but going forward the entire product will be different,” he believes. “Autonomous driving is becoming a reality much faster than we think and, one step forward, the whole idea of transportation will be different. That also means the manufacturing process will be very different. The industry will change from the commodity business that it is now to a lifestyle business.”
Geely has a lot of momentum in the manufacturing business but Li is keen to ensure sustainability of the company’s success in light of industry developments. Fifteen years after he decided to swap seats on Broadway for a spot on the cast, Li does not regret the move. Shaping the obligations and investments of the company in this important transition phase for the industry has proven exciting yet challenging, he says.
“In investment banking, it’s long hours and an unpredictable lifestyle but at the very least you know exactly what is expected of you. Now, I still put in the long hours and have this unpredictable lifestyle but on top of that, I have all these responsibilities. I don’t have anyone to go to and ask for advice.”Words that most treasurers and CFOs in Asia will readily agree with.