The Ford Motor Company (NYSE: F) recently announced that it has decided to keep Volvo, despite Ford's current plan to focus on its core American brands. Ford's other two foreign brands, Land Rover and Jaguar, will be sold and should be out of Ford's hands by early 2008.
An analyst quoted in The New York Times stated that Ford's plan to keep Volvo was not a positive development. Brian Johnson, of Lehman Brothers, speculated that Ford was unable to find a buyer for Volvo, or at least one who would pay a good price. Ford has owned Volvo for eight years, paying $6.45 billion for it in 1999. Although Ford does not provide detailed financial reports for Volvo, it did state that Volvo lost money in the last quarter.
Not everyone agrees with Mr. Johnson's pessimistic analysis. I've argued that Ford should keep Volvo as part of an effort to make the safest American cars. Ron Pinelli, president of Autodata and a former Volvo employee, has also argued that Ford can benefit from keeping Volvo. Volvo makes some very good cars and its brand has a positive image. But, he warned, Ford has to let Volvo be Volvo -- it's time to stop interfering with the Swedish engineers and let them build high-quality cars on their own. It's not clear, though, that Ford's managers in Michigan can do that, and so Volvo is likely to continue limping along under American control.
Ford also announced today that it would not build a new plant in North America. Last year, Ford indicated that it would build a low-cost assembly plant somewhere in North America. While it did not specify where, the emphasis on low-cost made many analysts conclude it was to be in Mexico. But the recent concessions made by the UAW, along with excess capacity in Ford's existing plants, have led Ford to scrap that plan.
Ford also announced today that it would not build a new plant in North America. Last year, Ford indicated that it would build a low-cost assembly plant somewhere in North America. While it did not specify where, the emphasis on low-cost made many analysts conclude it was to be in Mexico. But the recent concessions made by the UAW, along with excess capacity in Ford's existing plants, have led Ford to scrap that plan.
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Reader Comments (Page 1 of 1)
11-16-2007 @ 2:00PM
jpdr1100 said...
Most of the Fords that made the IIHS list of the safest cars are based on Volvo platforms.
Ford has gained something from owning Volvo, not sure if goes the other way as well.
11-16-2007 @ 4:39PM
Edward Adams said...
The analyst does not know what he is talking about. Volvo has been highly integrated into the company, and it would be very difficult to separate the two at this point. Both companies share engineering release systems, and have substantial parts commonality as well. Volvo does most, if not all, of the safety engineering for Ford brands - witness the outstanding IIHS test results which put the company at the top of the heap. Secondly, the company has a track record of NOT interfering with Volvo business - of letting Volvo be Volvo. Volvo products have benefitted from Ford as well: the V8 engine used in their premium brands is a derivation of the old Taurus SHO V8 program. Further, the S40 model is derived from the Mazda 3 platform, and is a world-class product.
11-18-2007 @ 2:05PM
Bill said...
The Ford family and all share holders would do well if the Ford car brand would be sold at any price. Keep the Ford trucks and Volvo. Volvo trucks are a stand alone brand and do very well. The Ford truck brand is strong and would do well alone. Volvo is a very good company, stronger when originally bought. But it can return to that strength if Ford where not around. I worked in Goteborg for SKF when Ford bought Volvo. You could not get a hotel room in Goteborg for many months after ford bought Volvo. I an a ford share holder and I would be very pleased if the above stratagey would be employed.