A report in the Swedish business newspaper Dagens Industri says that Ford-owned Volvo Car Corporation showed an operating loss in the second quarter. The report said that the Q2 loss followed a strong first quarter and year-to-date the unit is still in the black.

However, a weak third quarter financial performance is expected to follow.

The size of the second quarter operating loss was not reported.

Volvo Car is part of Ford’s prestige brands unit Premier Automotive Group (PAG) which also includes Jaguar, Land Rover and Aston Martin. The PAG brands have come under the spotlight as part of an operations review at Ford that it is widely speculated could see one or more brands sold off.

Heavily loss-making Jaguar has been the hot favourite to go, possibly as part of a package that includes Land Rover.

Although Ford does not break out the individual PAG brands in its financial reporting, Volvo Car – purchased by Ford in 1999 – was said by insiders to have been in the black until this year when unfavourable model cycles and a weak dollar combined to bring about the second quarter operating loss.

First half sales of Volvo cars in the US market were 10% down on last year.

The PAG division as a whole swung to a pre-tax loss of US$162m for the second quarter from a pre-tax profit of US$17m and Ford said that it now expected the unit to be unprofitable in 2006 – it had previously forecast being close to breakeven on a pre-tax basis.

Ford has been under pressure to take more dramatic restructuring efforts following deeper Q2 losses.

Volvo Car CEO Fredrik Arp told just-auto last month that there would be an improvement to Volvo Car sales later in the year with the impact of a renewed S80, C70 and the upcoming small Volvo, the C30 (read the full interview here).

There has been some speculation in the industry that while Ford had been keen to hang on to Volvo – rumoured to have been the subject of interest from Renault – the brand’s move into loss and problems in selling Jaguar might make it a more likely candidate for disposal now. A history – until now – of solid profitability could help to command a good price. 

Analysts also note that Volvo Car is more standalone within PAG than the heavily integrated Jaguar and Land Rover operations in Britain.

Dave Leggett