SHANGHAI -- For a long time, the word "partner" has been abused by automakers operating in China.
When foreign automakers refer to their Chinese joint-venture "partners," we know they are not using the word in its real sense.
But when Volvo Car Corp. and Zhejiang Geely Holding Group Co. announced a technology partnership earlier this month, we had good reason to believe they truly meant it.
Why? Let's start off by considering rival partnerships.
Global automakers are required by law to form a joint venture with a Chinese company, so it's not something of their own choosing.
Since both companies make cars, they are in fact potential rivals. That explains why foreign automakers typically withhold their technology from their Chinese partners.
Global automakers typically view their joint ventures as little more than corporate shells to set up assembly plants in China. There is barely any technology transfer.
But it's different with Volvo and Geely. Both companies are owned by the same person, a Chinese entrepreneur named Li Shufu. This allows them to align their interests.
Under the deal signed last week, the two parties will jointly develop small engines, a small-car platform, and alternative energy vehicles such as electric cars, conventional hybrids and plug-in hybrids.
So Geely will get cutting-edge technology. What does Volvo get from this deal?
The Swedish automaker will purchase parts together with Geely -- allowing both companies a discount. The partners can share production lines, and they can even share platforms.
All this will enable Volvo to reduce production costs in China.
Will the alliance with Geely cheapen Volvo's brand image? It won't, as long as the two brands are kept separate in marketing and sales. Li Shufu is a wise man and I believe he knows how to do this.
On balance, the deal's main beneficiary will be Geely, which will move upscale as it adopts Volvo's technology. Geely's domestic competitors should be jealous; they will never get this much help from their foreign partners.