2007-07-15

Ford Considers Selling Volvo Unit

Reports from Wall Street Journal

Ford Considers Selling Volvo Unit

By STEPHEN POWER
July 15, 2007 11:00 a.m.

Ford Motor
Co. is now considering selling its Volvo car unit, reversing an early
position that the Sweden-based luxury division was not for sale, a
person familiar with the matter said.

The shift comes as Ford’s fortunes in the key North
American market continue to sour. Its market share in the U.S. have
fallen faster than the company had expected, increasing the pressure on
the company’s already-battered bottom line. The auto maker lost $12.6
billion in 2006.

Late last year the company mortgaged most of its
plants and other assets in a bid to raise cash. It also sold its Aston
Martin luxury nameplate and has begun considering a sale of its Jaguar
and Land Rover brands as well.

Although Volvo is likely to attract the interest of a
number of potential buyers, Ford had until now maintained it was not
willing to sell the unit.

So far Ford has made no decisions on the matter, and a
company spokesman said Sunday that Ford is not discussing the idea with
any would-be buyers. A person familiar said the company’s deliberations
on Volvo were still at an early stage. But internally, another person
at the auto maker said, the idea of selling the brand is now seen as
having a 50-50 chance of happening.

The fact that the company is considering such a move
is the latest sign that the auto maker is considering scaling back its
luxury-car strategy under new CEO Alan Mulally.

“Ford is not in discussions with any companies in
relation to selling Volvo,” a company spokesman said Sunday. “As we’ve
been saying since last year, we continue to assess all of our
operations and are looking at our strategic options.”

A Volvo spokesman in Sweden referred questions about
Volvo’s future ownership status to company spokesmen at Ford
headquarters in Dearborn, Mich.

In recent months, Ford had publicly ruled out a sale
of the Swedish brand. In March, Volvo Car Corp. chief executive Fredrik
Arp told a reporter at the Geneva auto show that Mr. Mulally is “very
supportive of developing the brand and developing the products going
forward.” In June, however, Mr. Arp declined to comment on the idea of
a sale when asked about it in front of an audience of auto-industry
executives attending a conference in June.

A person familiar with the matter said that contact
between Ford executives in Dearborn and Volvo executives has grown
noticeably less frequent in recent weeks, which some see as a sign that
the brand’s future status is uncertain.

In June, Ford said it had retained financial advisors
to help it identify “the best way forward” for its Land Rover and
Jaguar brands, which are part of the Ford Premier Automotive Group that
lost nearly $4.8 billion since 2004, despite numerous restructuring
efforts.

Ford doesn’t break out results from its individual
European luxury brands, but has attributed much of the red ink to
Jaguar. Swedish brand Volvo is also part of Premier Automotive Group.

“The reason I reject going into this speculation and
discussion is that it’s not in the interest of Volvo car stakeholders,
customers, dealers or anybody else, and [because] I don’t own the
business,” Mr. Arp said in June at the auto-industry conference.

Ford sold Aston Martin for $848 million. Until
recently, the company had said it wasn’t interested in selling Land
Rover and Jaguar. Ford acquired the Jaguar passenger-car unit for $2.5
billion in 1989 and the Land Rover SUV unit for $2.75 billion in 2000,
but has been forced to reassess its global business strategy as a
result of big losses in North America, where high gasoline prices are
pulling buyers away from Ford pickup trucks and sport-utility vehicles,
while new entrants dilute the segments.

How much money Volvo could fetch for Ford is unclear.
Merrill Lynch estimated earlier this year that the combined sale of
Jaguar and Land Rover would raise between $1.3 billion to $1.5 billion,
while a sale of Volvo would raise about $8 billion. Volvo sells between
430,000 and 450,000 cars a year, far fewer than rivals such as BMW AG
and DaimlerChrysler AG’s Mercedes unit, each of which sell more than a million vehicles a year.