BMW to Buy Volvo?

The chatter about BMW acquiring Volvo from Ford started in earnest a couple of weeks ago, and has gotten much louder in the last few days.

Neither BMW nor Ford will comment, but apparently sources within Ford, BMW, and Volvo have confirmed to various news entities that Volvo is in play, but there is no consensus on where Volvo will go when it leaves Ford. Some say Volvo will go to BMW, some say it’s going to a private-equity firm, a la Chrysler/Cerberus, and some point to VW as a dark-horse contender for the company. And, of course, it may not go anywhere. Although it’s worth pointing out that we predicted in December 2006 that Ford would certainly sell Jaguar, Aston Martin and possibly Volvo in calendar year 2007, and its only May at this point. We’re still sticking to our prediction.

Back to BMW – will they buy Volvo if Ford wants to sell? That’s a tough one to call. The debacle that was Rover has not receded into BMW’s collective memory at this point, and Daimler’s public embarrassment with Chrysler is awfully fresh as well. And BMW already has high-line sedans and SUVs. But, BMW would like to get more scale in their operations just like anyone else, and, Volvo is a healthy car company with good growth prospects no matter who owns them. They are not a reclamation project (Rover), nor are they susceptible to their product mix becoming irrelevant due to a changing market environment (Chrysler). Volvo is launching 7 new models, starting from 2006, and ending in 2009. It has market shares of only 1-2% in its strongest markets, Italy, Germany, U.K. and the U.S., suggesting there is still quite a bit of unrealized potential (safety and quality sell almost everywhere) to be had in those regions, as well as others, since Volvo sells their cars in over 100 countries. And, of course, it has approximately 20% of the market in its home market of Sweden, a relatively small market.

I think BMW will seriously, seriously consider acquiring Volvo. Ford bought Volvo for $6.5 billion USD in 1999 and if they don’t ask too much of a price premium in the time elapsed, BMW may be a player for the deal. I’m sure there are people at BMW, shouting “no more pain!” and there is another group shouting “grow or die!” and the biggest group of all is in the middle, saying “let’s think about it some more”. We’ll see who can build consensus in the next few weeks or months.

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

Share This Post On

13 Comments

  1. The Germans just can’t do big acquisitions. I think this would be a mistake. They can only do small companies or a single model line at once.

  2. I like the idea, and I hope it happens, especially if the Volvo cars can go back to rear-wheel-drive. Front-whell-drive is not my thing in an expensive car.

  3. I like the idea too. I think it’s a good match from a product and a company philosophy standpoint. I hope it happens ASAP.

  4. NO NO NO NO NO NO NO NO NO NO!

    Just let BMW keep doing what they’ve been doing – no distractions!

  5. Wouldn’t be more easier to sell Jaguar to BMW instead? Or even if this strategy is only a pipe-dream, BMW take a big stake or share of FoMoCo like 30% of Ford for example.

    Also, those rumors of selling Volvo, wasn’t the first time I heard that, before BMW, there was Reanult who wanted to buy Volvo a couple of years ago http://car-reviews.automobile.com/news/industry-report-europes-renault-wants-to-buy-volvo/503/

    The next question to ponder is does BMW decided to grow, so they could avoid to be the victim of a takeover?

  6. I think BMW will buy Volvo just to make themselves big enough so that they will not be acquired themselves. Also, they will get better economies of manufacturing scale. Also, Volvo is a good car company and lots of other companies would like to have Volvo, why not BMW? Very close in product intent.

  7. At least Volvos would get much more exciting. That would be good IMHO. I hope they ditch the FWD too.

  8. BMW couldn’t handle the Rover purchase, so how are they going to make things work with Volvo? I don’t think the Germans are very good at sharing technology. Just look at Chrysler and Mercedes! And why would they want to take on a little loser company like Volvo?

  9. I can see how this would work. Share across the Mini platform for the small Volvos, and share across the BMW platforms for the larger Volvos after you switch them back to RWD.

    So, that’s a good plan.

  10. So will it be BVMW, BMW-Volvo, BMWV, or something else?

  11. Or maybe BMW is just removing a possible competitor?

  12. Glad to see it. Ford needs to get back to being an American company. Bring back the Falcon name, updated for now. Bring back the original small Bronco. Update the Crown Victoria.

  13. Well, the denial took awhile to come out, but Ford Motor Co. said this to the Wall Street Journal this afternoon:

    ” Ford Motor Co. said Tuesday it isn’t currently in talks with any party to sell its Swedish Volvo unit, but the struggling U.S. auto maker continues to weigh its strategic options concerning its portfolio of assets.

    “Ford Motor Co. is not in discussions with BMW or any other company regarding interest in the Volvo Car Corp.,” Ford spokesman John Gardiner said, referring to recent media reports that talks are under way with Germany’s BMW AG.”

    So, not closing the door on a sale of Volvo, but saying that they are not talking with BMW about it. This is becoming similar to the run-up regarding the Chrysler sale. Stay tuned…

    Brendan Moore

Submit a Comment

Your email address will not be published.