Blog: Ford and Volvo Cars
Dave Leggett | 10 November 2009
Seeing the just released pictures of the new S60 this morning has got me thinking. I wonder if Ford may decide to hang on to Volvo Cars after all? Why? Because it is a valuable asset and maybe, just maybe, some at Ford will take the view that there is now no need to sell it (Ford making good turnaround headway lately), that Volvo can be returned to profitability on a reasonable timescale and that ultimately its technology specialisations and engineering architecture sharing with Ford make it preferable to hang on to it.
The brand's supporters in Dearborn may feel that the situation has changed now that Ford is on a more solid financial footing and automotive demand prospects globally are looking up.
Volvo is also a highly respected global premium brand. Exchange rates and unfavourable model cycles - as well as market geography and the recession - can explain a lot of what's gone wrong with Volvo profitability in recent years.
I am just speculating, of course. When I met with Mr Mulally recently, he was pretty enthusiastic about One Ford and the rationale behind focusing on a core brand. Fair enough; it has delivered results. And that was a very good bit of business offloading JLR for a few billion just before the recession hit. Along with the assets mortgaging, he seems to have a good sense of timing on the big financial transactions. I asked him about Volvo. He gave a straight bat answer and a few days later Ford said Geely is a preferred bidder.
This is what Lewis Booth said in a statement at that time: "Any prospective sale would have to ensure that Volvo has the resources, including the capital investment, necessary to further strengthen the business and build its global franchise, while enabling Ford to continue to focus on and implement our core 'One Ford' strategy.”
"Ford believes Geely has the potential to be a responsible future owner of Volvo and to take the business forward while preserving its core values and the independence of the Swedish brand. But there is much work that needs to be completed in the more substantive discussions that are agreed to take place. We have no specific timeline to conclude the discussions."
Much work to be done, eh? I bet.
Mr Mulally also highlighted the fact that Ford has continued to invest in Volvo – as evidenced by the new S60.
So sell the brand and technology to a Chinese firm or hang on and realise a return from all that investment in a 'soft premium' brand that comes with positive eco/safety values and potentially very good margins. We are at the low point in the economic cycle. In five years time, hanging on to Volvo might look like another smart bit of business.
I wouldn't mind betting that Ford could 'do a GM' and say it has decided to hang on to Volvo Cars after all. But what's the mad rush? A few more months of uncertainty in Gothenburg before finally and dramatically 'coming to the rescue' might also yield plenty of goodwill from both workers and management in Sweden (not to mention the Swedish government). Swedish stakeholders may well conclude that it is 'better the devil you know'.
For Ford, talking to Geely in advanced discussions over Volvo might uncover some interesting insight into its strategic aims, also. Bonus points.
As I say though, and to be absolutely clear, I am only speculating.
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