Posted by: David Kiley on July 16, 2007
Take a Volvo S80. Please.
As I have been writing on and off for weeks, Ford is out to see what kind of price the Swedish automaker will get on the open market of rival automakers and private equity.
Healthier than Ford’s other premium brands, Jaguar and Land Rover (also for sale), Volvo’s results have ranged from losing money, to break even, to earning a little over $1 billion since Ford acquired the brand in 1999.
Despite published reports saying Volvo is earning over $1 billion, my sources put it much less. Unlike Jaguar and Land Rover, Volvo is not a basket case. That makes it more attractive to rival automakers than private equity. What’s wrong with Volvo?
●While the designs have become modern, the Volvo design language does not cry out “safety!.” That has left Volvo with a difficult task of trying to make a case that its cars are safer than anyone else’s, when, from 50 yards, the sedans kind of look like Acuras, and the small cars and coupes could be any brand. Car and Driver calls the S80 the “Snoozer Cruiser.”
●Other automakers have closed the gap on safety engineering, which is defined more by airbag and anti-rollover add-ons rather than basic vehicle construction to save lives in crashes. This trend has watered down Volvo’s brand strength.
● Volvo is a brand that should have, by now, introduced a gas-electric hybrid, to its portfolio. In truth, Ford took the hybrid technology Volvo was developing when it bought the Swedish automaker, put it in Ford’s Escape, but left it out of Volvo’s product plan.
● Volvo’s manufacturing is pretty much all in Europe and mostly in Sweden. The weak dollar plays hell with the exchange rates, Volvo’s profitability and pricing in the U.S. Manufacturing some vehicles in the U.S. has been proposed, but not advanced.
● While Ford has increasingly made good use of Volvo engineering (the Taurus, Sable, Taurus X, Flex and forthcoming Lincoln crossover are all built off a Volvo platform), Volvo still goes its own way on too much engineering and purchasing.
Ford CEO Alan Mulally is intent on building up the Ford brand worldwide, and does not want the company distracted trying to play turnaround with Jaguar, Volvo and Land Rover. As Ford is burning cash en route to its goal of profitability by 2009, he could also use the $6-$8 billion he could get from Volvo along with the same take for the combined Jaguar and Land Rover.
He’s got brands to sell. All he needs are motivated buyers. Look for BMW, Renault and at least one Chinese automaker to surface.