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Ford's Volvo sale could get a frosty reception

Posted by: David Welch on December 10, 2008


Ford is buzzing the phones of carmakers around the globe to find a buyer for Volvo in an effort to raise cash and get the money-losing Swedish carmaker off its books. The company has made a few inquiries, most notably to India’s Mahindra and Mahindra and China’s Changan Automobile Group, sources close to the talks say. But nothing firm has come yet. One source said that Mahindra is working with a private equity partner as well.

The problem is that this is the worst time to be selling a carmaker, or anything but a dollar store for that matter. Sales of even luxury cars are in the tank as global economies swoon and the credit markets remain frozen. That means that Ford’s hopes to move Volvo for the reported $6 billion it wants could be on ice, too. Sources close to Ford’s efforts to sell the company say that the carmaker would be lucky to fetch $3 billion. That’s far less than Ford hopes to get.

Mahindra and Mahindra would be a likely buyer. The company has worked closely with Ford in India and wants to launch its own brand in the U.S. in late 2009 or early 2010. Mahindra wants to start with a diesel pickup and sell an suv later. The Ford and Mahindra families are also said to have ties.

But Ford will have a tough time cutting Volvo free and clear. There are several Ford and Volvo models that are jointly engineered. So any buyer will need to keep some kind of joint development agreement going to keep new models coming. Ford may even have to keep a minority stake in Volvo if a deal is done, sources said. And that’s if Ford can actually find a buyer and the buyer can get financing for an acquisition. Ford: It has its problems, too.

Reader Comments

Paul (Vw)

December 17, 2008 9:11 PM

Sweden is hardly an impoverished country. The government there could dig deep into it's pockets to save factories there.

For that matter, the same goes for Canada...

>>> Prime Minister Stephen Harper called President George W. Bush on Saturday to say that if the United States provided aid, Canada would provide its own aid of 20 percent, a U.S. diplomat said on Tuesday. That could amount to several billion dollars from Ottawa.

I sure hope he means 20% of the US based bailout and not 20% of some sort of money which would be earmarked for Canadian companies. What the heck, why wait for our government to pony up cash, come on Canada...step up to the plate now!

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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