Ford weighs selling Volvo amid industry downturnby Multiple Authors on Dec. 01, 2008, under Edge
DETROIT – Ford Motor Co. is considering selling Volvo Car Corp. as the beleaguered U.S. automaker seeks to raise cash and survive tight credit markets and a global automotive sales crisis.
Goteborg-based Volvo Cars, which Ford bought in 1999, has been struggling with declining demand and a strong euro which made its products more expensive. Volvo sales through October are down more than 28 percent compared with the same period in 2007, according to Autodata Corp.
Ford said Monday it expects its strategic review of the Swedish luxury automaker will take several months. The move is one of several actions Ford is taking to strengthen its balance sheet amid what it called “severe economic instability worldwide.”
“Given the unprecedented external challenges facing Ford and the entire industry, it is prudent for Ford to evaluate options for Volvo as we implement our One Ford plan,” said company President and Chief Executive Alan Mulally in written statement, referring to a plan to standardize the company globally.
Ford officials would not speculate on how a potential sale would affect the companies. Spinning off Volvo into a separate entity may be a possibility, since after a prior review, Ford started taking steps last year to allow Volvo to operate on a more independent basis.
“Our relationship with Volvo during this time remains unchanged, and we will continue to work together,” said Ford spokesman Mark Truby. “What’s most important is that we make the right decision.”
The Swedish government has said it has been in talks with Volvo and with General Motors Corp.’s Saab unit following reports that the U.S. parent companies were seeking aid for their Swedish carmakers.
Stefan Lofven, chairman of Swedish union IF Metall, said it is now extremely important that the Swedish government steps in and shows its support for Volvo in the sales process.
“Volvo is a strong brand. Now they have to find a serious owner who wants to and can develop Volvo in the future,” he said.
He said previous talks with the government about a worst-case scenario had considered temporary state ownership. He didn’t rule out that solution now.
Sweden’s deputy prime minister, Maud Olofsson, told local news agency TT that she was not surprised by Ford’s decision.
“I have seen for a long time what problems Ford has. In that situation it becomes natural for an American company to focus on the American market,” she said.
For the 2009 model year, Ford and Volvo led all brands with 16 vehicles on the Insurance Institute for Highway Safety’s list of the safest cars.
But despite its high safety ratings and strong reputation as a family vehicle brand, Volvo captured just 0.5 percent of the market through October, compared with 0.8 percent for the same period last year. That accounts for 3.7 percent of Ford’s total sales this year.
Even with tight credit worldwide, Ford could pull off a sale because Volvo would be attractive to automakers in emerging markets such as Tata Motors Ltd. of India, said Kevin Tynan, an analyst with New York-based Argus Research Corp.
“There’s probably enough money out there for either an emerging market automaker or somebody looking to get a brand with a little bit of cache to it,” Tynan said.
Tata in March purchased Jaguar and Land Rover from Ford for $1.7 billion. The Volvo brand would complement Tata’s two luxury brands, Tynan said.
Ford had considered the sale of Volvo, Land Rover and Jaguar for some time, but since the latter two weren’t as intertwined, their sale was less complicated. Depending on how it’s structured, a Volvo sale could end up hurting the Ford brand because the companies share safety technology and some Ford vehicles have Volvo underpinnings.
For example, Ford’s Taurus sedan, Taurus X crossover vehicle and Mercury Sable sedan are built on Volvo chassis, but Tynan said Ford can maintain manufacturing relationships long enough to transition the vehicles to new platforms.
“I think there’s enough mutual benefit going back and forth. There’s some benefit to whoever buys it to maintain the relationships,” Tynan said.
Ford, GM and Chrysler LLC will go before Congress this week to present a proposal for $25 billion in loans to keep them afloat as sales sag.
Ford shares rose 8 cents, or 3 percent, to $2.77, in Monday afternoon trading.
AP Auto Writer Dan Strumpf in New York and Associated Press Writer Malin Rising in the Stockhom bureau contributed to this story.
By Tom Krisher, Kimberly S. Johnson