Volvo Sale: Ford, Still Undecided

Anthony Fontanelle
September 12, 2007

Earlier, it was reported that the Ford Motor Company is eyeing on the possible sale of its Scandinavian brand Volvo Cars. However, the Dearborn-based automaker has dismissed the reports as untrue. But the rumor persists. And the automaker is left undecided.

Ford of Europe chairman Lewis Booth questioned whether the auto giant can continue to invest in its premium brands but said that the company has yet to decide whether to sell its Volvo unit, Forbes reported.

At the Frankfurt auto show, Booth told the Wall Street Journal that the prospect of unloading the Swedish unit 'is quite complicated' by the high level of components the brand shares with Ford. He emphasized that a decision on whether to sell has not been reached.

Booth, who also serves as chairman of Volvo's board, said that the Dearborn automaker will 'probably' sell its British Jaguar and Land Rover brands, but added that the decision on the buyer will not be guided strictly by price. "There are a lot of people employed by these brands, and we've got to look after them," Booth said. European Jaguar and Land Rover companies together employ about 16,000 people, mainly in the United Kingdom.

Asked whether Ford needs a premium brand, Booth has this to say: "The decisions we make are not around 'would it be better to have it or not have it.’ The decisions are, can we manage, do we have the financial resources to do everything? Clearly, we've concluded with Jaguar and Land Rover we don't.... This is a discussion of realities."

Booth, who joined Ford in 1978, is one of three executive vice presidents immediately under CEO Alan Mulally. What sets Booth apart is that Ford of Europe, his core operation, is profitable. The operation is also developing many of the new vehicle architectures that Ford intends to use worldwide in an effort to cut costs and reduce the company's dependence on sales of gas-guzzlers in the United States.

At the Frankfurt auto show, Ford is trying to illustrate the potential fruits of Mulally's strategy by touting a small concept car that it hints could be the basis for a new subcompact launched world-wide between 2008 and 2010, added the Wall Street.

Asked about Mulally's remark that Ford doesn't need a premium brand, Booth said: "I agree with him. He said it in the context of, 'We've got to fix the Ford business.'" However, Booth allowed that the decision on the Scandinavian brand is a more complicated decision than the one on Jaguar and Land Rover, all part of Ford’s Premiere Automotive Group, which have been less reliable in generating profits.

Volvo is on track to report record sales this year and has generally been profitable since Ford acquired it in 1999. This is attributed to the fact that the Scandinavian brand has established a name synonymous with safety. This is because Volvo espoused a good number of safety milestones. Volvo radiators, engines, airbags, seatbelts, brakes, and other safety systems are gradually improved to promote utmost protection.

"The [Volvo] business is much more integrated" into Ford, through component sharing, Booth said. Some analysts also see value in keeping Volvo because of its expertise in safety and in developing hybrid engines that run on both gasoline and electric power. Barely a year ago, Ford and Volvo jointly announced plans to establish a $1.4 billion center in Sweden to develop hybrid cars.

Source:  Amazines.com