Who Wants Volvo?

Posted by: David Kiley on July 16, 2007

Take a Volvo S80. Please.

That’s sort of what Ford is saying these days as it tries to drum up interest in its Volvo automobile business.

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.

Reader Comments

Brendan Moore

July 16, 2007 2:11 PM

As you mention, Volvo is not the distressed merchandise that the Jaguar/Land Rover package deal is; and Volvo should have no shortage of suitors should Ford decide to pull the trigger soon.

We just (still on the front page as I type this) did a piece on this on Autosavant, but for the real background on how Ford got to this point of being forced to sell Volvo, follow the link within our current post to the one we did in December 2006 in which we predicted the sale of Aston Martin, Jaguar, Land Rover, and (probably) Volvo in 2007. I would supply the link in this comment to make it easier for other readers but hyperlinks are not allowed in these comments.

Anyway...Ford is in a terrible jam from a money perspective, their renewal efforts are floundering, and they have apparently decided they're going to need more money, so they're forced to think about selling Volvo. It's something they don't want to do at all.

How much longer before they separate out Land Rover from Jaguar, so that they can sell Land Rover? There would be buyers for Land Rover alone; the hold-up has been that Ford is trying to sell Land Rover and Jaguar as a package and potential buyers are balking at taking the problem child that is Jaguar.

B Moore - www.autosavant.net

Mike

July 17, 2007 6:10 AM

From reading this, I wonder how Ford would be doing right now if it wasn't for Volvo. I see nothing but Ford taking Volvo's ideas and using them. I don't see anything going in the other direction.

I own a Volvo. I love it. Next car I buy will probably be another Volvo. The quality of the car is so much higher than anything I've seen in the Ford line. I really hope that Ford sells to private investors instead of another automobile company. It's a shame to see all the technology going and nothing coming back in return.

amos adams

July 17, 2007 7:15 AM

Volvo is a big winner on the international auto scene with safer and stylish vehicles that more people want, but fewer can afford. Competitive pricing pressures have limited its overall success and limited its sales numbers. Volvo should have a world car and provide much of the same safety and design impact for a smaller, more cost efficient world car with greater fuel efficiencies. Ford would be well advised to keep this jewel and style more of its hybrid vehicles and new wave of so called "green cars" on the Volvo Model. It's marketing and innovative styling has always been a
category seller which Ford should copy for some of its other vehicles.

online pharmacy blog

July 19, 2007 10:40 AM

Every european brand that Ford took over had quality of its vehicles decline significantly.

Mauro

July 21, 2007 2:16 AM

someone stop Mullally please Ford is in real danger with this stupid man.
It's unbealivable that he want sell pag, when the other japanese carmaker are inventing luxury brands from nothing.
pag is a great opportunity for the future of Ford.
The only problem at Ford is they don't have with balls.
it's the same story with Fiat.
i'm really disappointed.
SOMEONE STOP MULLALLY PLEASE, BEFORE IT'S TOO LATE.
from italy

Sam

April 28, 2009 11:11 PM

Mauro,
How stupid did you feel two years after slamming Alan Mullaly ?? Ford had and has the right guy. Luckily nobody took you seriously. Ford is the only USA car company on the right track.

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