Although any sale by Ford of Volvo would be complicated, it is looking increasingly likely despite denials, Global Insight auto analyst Rebecca Wright said in a research note on Thursday.
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Volvo yesterday announced 2,000 job cuts in Sweden, the majority white collar workers, and said 300 more posts would go overseas. It is also ending 500 consultants’ contracts.
Wright said slumping sales and a lack of a US production facility had hit Volvo hard there as the weak dollar was hitting margins on cars shipped from overseas.
“Whilst Volvo once targeted North American sales of 200,000 cars by 2010, sales have been reduced to around the 90,000 mark,” she wrote.
Cost-cutting in the US was believed to include the closure of one-fifth of the North American dealerships, Wright added.
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By GlobalDataA respected Swedish business daily yesterday said Ford was talking with potential Chinese (believed to be SAIC) and Russian buyers for Volvo though a Ford spokesman, speaking to Automotive News Europe, categorically denied the rumours: “We have been consistently saying since the end of last year that Volvo is not for sale. We are focused on improving Volvo’s business results.”
But Wright said Ford’s position on Volvo is confusing.
“In the last year, Ford has publicly said that having conducted a strategic review, it has decided not to sell Volvo after all and will instead give it more independence. However, rumours persist that, privately, Ford CEO Alan Mulally favours the sale of Ford’s last remaining premium brand.
“Meanwhile, Kirk Kerkorian, who is Ford’s latest major shareholder, has made his views clear that Ford should sell the Swedish car-maker which it acquired for SKR50bn at the end of the last decade,” she wrote.
Wright added: “It should be noted, however, that any sale of Volvo would be far more complicated than the sales of Ford’s other European upmarket brands of Aston Martin, Jaguar and Land Rover in the last 18 months.
“Volvo’s products are much more deeply integrated into Ford’s global portfolio than the three UK brands ever were. As well as allowing amortisation of expensive platforms over incrementally more volume, globally, such integration would make the extraction of the brand an extremely intricate and costly process.
“Another, more simple, reason for Ford not to sell Volvo right now is the extremely bad timing, with the current credit market possibly preventing the company from dropping the carmaker due to anticipated inability to find adequate financing for a buyer.
“Of course this is way the world goes; times are hard and so Ford has to think about selling Volvo. However, because times are hard buyers will inevitably be in short supply.”
Wright said Ford’s premium brand ambitions are in tatters as are its plans to return to profitability any time soon.
“Having already sold off Jaguar, Land Rover and Aston Martin as it tries to claw its way back to profitability, it is looking increasingly likely that Volvo too will soon find itself on the auction block, despite the obvious attractions that the respected Swedish brand still holds,” she concluded.
