Ford Decides to Hold Onto Volvo

By Chris Haak

11.09.2007

Autosavant has previously reported that as part of Ford’s continuing review of its brand portfolio (coupled with a relatively urgent need for cash to fund its turnaround efforts), it had considered selling Volvo.

Yesterday, as part of the release of Ford’s better-than-expected third quarter financial results, CEO Alan Mulally announced that for the time being, Ford is not going to sell Volvo. Instead, Ford intends to improve Volvo’s cost structure and brand positioning. The objective for Volvo in the near term is for it to operate more independently, yet achieve greater efficiency by cooperating with the global Ford organization in purchasing and product development.

Both Volvo and Ford are in difficult positions. Aside from its aforementioned struggles, Ford has depended on Volvo-developed platforms for several of its large cars and crossovers, and an extraction of Volvo from Ford might be difficult while there is so much component sharing. Volvo is struggling with its perception in the marketplace as safe family cars with a touch of luxury, but also of a brand that is a step or so behind the big-name luxury brands such as BMW, Mercedes-Benz, and Audi. Also, the fall in value of the US dollar, coupled with the appreciation of the Swedish Kronor, has made Volvos (all of which are produced in Sweden currently) difficult to price competitively in the US. Volvo’s options are to reduce the cost structure (possibly at the expense of any premium image), raise prices (possibly at the expense of sales volume), or hold the line on prices (possibly at the expense of profitability). Speaking of profitability, although Ford does not break out Volvo’s results individually, but the company did say that Volvo posted an undisclosed loss in the third quarter of 2007. According to Automotive News, sources close to the company have said that it was in excess of $100 million.

Ford said that just because it decided not to sell Volvo in the short term, it doesn’t mean that Volvo might not eventually be sold. Down the road, the focus on improving efficiencies in product development and purchasing might make Volvo’s financials look better for a potential buyer, and encouraging Volvo to otherwise operate more independently might make it a more attractive purchase for another buyer.

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Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

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4 Comments

  1. I think this is is a smart move by Ford and it shows that although they are in crisis mode trying to turn things around, crisis isn’t chaos. This is a good decision. Mulally is not doing stupid stuff just to do “something”.

  2. Having Volvo is one of the few things Ford has got going for them. Also, is it just a coincidence that Ford’s cars have gotten a lot safer in the crash tests since they bought Volvo? Don’t think so.

  3. How many times is Ford going to go back and forth on this? Unlike a lot of people I think Ford should sell Volvo and concentrate on Ford. Ford has a lot more business they can do in new markets with low-priced and mid-priced cars and they need to get after it.

  4. That is exactly how the people at Ford describe their current mode of action; “crisis not chaos”. Are you a Ford employee, Larry?

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