Ford has just announced it is putting Volvo up for sale. The strategic review, announced today, is part of the Blue Oval’s rescue plan and, if it does sell its Swedish outpost, it could add hundreds of millions to Ford’s wonky balance sheet.
The news underlines the collapse of Ford’s global ambitions. Throughout the 1980s and 1990s, it carefully built up a portfolio of European premium brands including Volvo, Jaguar, Land Rover and Aston Martin as it assembled the Premier Automotive Group. A decade on, its plans to become a global premium leader lie in tatters.
Ford sold Aston Martin, Jaguar and Land Rover in the past year – and today’s announcement makes it increasingly likely that the Blue Oval will now wash its hands of Volvo, too.
Why Ford is selling Volvo
It doesn’t take an accountant to work out why Ford is likely to flog off Volvo. It needs the cash badly, as it prepares to persuade Congress tomorrow for its share of a $25 billion aid package, and Volvo hasn’t been profitable for years.
It bought Volvo for around $6.5 billion in 1999, but the Swedish premium marque’s results slipped into loss in recent years. Sales so far this year are down 14% to less than 300,000 in the first nine months, while pre-tax losses have crashed to $458 million in the third quarter.
What next?
It seems likely that any sell-off would take a long time. Remember how long it took to shift Jaguar-Land Rover, and even the relatively small business of Aston Martin? Expect a long tendering process and little interest as manufacturers struggle to hold up their businesses, let alone acquire a struggling small-time premium player.
Some observers believe that Volvo could form an alliance with Saab. GM is also considering abandoning its European partner, and the Swedish government is unlikely to let two of its biggest employers collapse. Both Volvo and Saab could be partly privatised, with the Swedish state buying a share, in the same way that Renault is part-owned by the state. And a wider collaboration between the two could be on the cards in the longer term…
The Ford boss speaks
‘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 Ford president and CEO Alan Mulally today.
‘Volvo is a strong global brand with a proud heritage of safety and environmental responsibility and has launched an aggressive plan to right-size its operations and improve its financial results. As we conduct this review, we are committed to making the best decision for both Ford and Volvo going forward.’
