Ford Motor Co. (NYSE: F) is cutting production at its Volvo unit, according to The Wall Street Journal. The move, which could affect one-third of workers -- some 700 -- is seen as an attempt to cut the costs and losses at the upscale Swedish brand.
The question everyone is asking is whether this move is done in preparation for a sale. According to "people familiar with the matter" who discussed such things with the Journal, CEO Alan Mulally is interested in putting Volvo, whose sales have been declining, on the block. Of course, to analysts, Mulally sang a different tune last month, saying the priority is improve the Swedish auto maker operations "dramatically."
As Kirk Kerkorian's Tracinda Corp. continues to build its stake int he company, he may also have a thing or two to say on the matter.
For now, Volvo is cutting where it makes larger, less popular vehicles, and it plans to make fewer cars overall. But can this make Volvo more profitable for Ford, or at least more attractive to buyers? There are costs associated with producing a smaller number of vehicles, but with Volvo reporting 22,000 fewer vehicles sold during the first quarter, cutting production makes sense. Another matter Ford has to consider is the massive losses it suffered lately just from the kronor-dollar exchange rate.
It was nearly a year ago that speculation ran amok that German carmaker BMW could be interested in buying Volvo. Could it still be interested? Years back, Renault was interested too. With the credit crunch still crimping deals, and with some major players like private equity -- keeping in mind Chrysler's sale to Cerberus -- absent, it's likely such a sale could be postponed.
After selling its Land Rover and Jaguar units to India's Tata Motors Ltd. (NYSE: TTM) in a deal worth $2.3 billion, and Aston Martin for $848 million to investors led by David Richards, if Ford sells Volvo, it will be left only with Lincoln as its luxury line.











Reader Comments (Page 1 of 2)
5-20-2008 @ 3:21PM
jpdr1100 said...
I never saw Ford/Volvo as a good fit. Ford got what it needed: access to Volvo's platforms and their approach to safety designs. It is time for them to move on. Unfortunately, I'm not sure where Volvo has to go. Hopefully not to BMW. They are not needed there.
5-20-2008 @ 6:26PM
sgentilejr said...
Forget about selling it...just shutting in down will stop the constant bleeding with the continous loses. They longer they try to keep Volvo open the more money they lose. It is like keeping your hand in a burning hot fire...rather than pull it out as fast as possible to stop the pain.
5-20-2008 @ 6:31PM
margaret roth said...
I hope ford keeps the volvo. I think if there was any way that the price could be lowered many people would be interested in buying one especially for their safety features and also keep the look it has now is so........much better looking than in the pass.
5-21-2008 @ 6:54AM
summazooma said...
Just closing it down is the wrong thing to do for a few reasons:
Volvo has helped add positively to Ford's bottom-line in the past and, in fact, at some points earlier on, it was a volume leader in the important Near Luxury segment (mid-to-late 90s);
Volvo has provided Ford with quick access to platforms and components that it uses for such key products as the Taurus/Sable/Taurus X/Flex/MKS, as well as a key contributor to the C-segment platform under such vehicles as the Euro-Focus/Mazda3/C-Max and even the larger Euro cars such as Mondeo. It's in-line 5-cylinder engine is the defacto performance engine for Euro-Ford products, including the Focus ST-series of models.
Volvo's impact on Safety engineering at Ford should not be underestimated. They know how to make vehicles that protect the occupants possibly better than anybody else, while still engineering relatively lightweight structures.
Volvo's strength as "The Safety Brand" is transferrable, because it is based on a strong customer value (not a technology or architecture), to a wider variety of products. Case in Point: The XC90, for it's time, differentiated itself in the market as the "Volvo of SUVs" with it's emphasis on Roll-Over Safety & Crash-worthiness. With Jaguar gone, it's possible that Volvo could fill a role as a key Global Luxury brand for Ford, perhaps even taking on other brands from a position of strength as Performance becomes (out of necessity) something more than just how fast... I like fast cars but, in the emerging era ahead of us, I think the brands that adapt easier are going to be around (and benefit the most) in the long haul. I think Volvo could be a winner in the long haul.
Finally, as for just shutting it down (versus selling it), that would be the most expensive and foolhardy approach. I am of the mind that a Brand (especially one as strong as Volvo is) has value to SOMEbody; It's just a matter of finding the party for which the value is greatest and sell it. Oldsmobile, in fact, in my book, could STILL be sold to a Chinese or Indian company, helping to defray the exhorbitant cost of "just shutting it down"; Volvo would/should be an even bigger ticket brand, if only because of it's viability and clear positive image.
I hope they keep it and integrate it even better (that's Mulally's credo these days) but, if not, sell it to the highest bidder.
5-21-2008 @ 7:07AM
David Fekete said...
We looked at a Volvo...really nice but too expensive and the warrenty was only 36 months. We bought an Acura, just as nice but 20,000 cheaper...got much better reviews on Edmonds too. What ever happened to that diesel engine Jeep started putting in the Liberty ? I almost bought one.
5-21-2008 @ 8:35AM
Dan said...
As American car makers struggle to regain buyer confidence the american consumer continues to buy the Japan made car. Remember this the Japanese are killing our auto infrastructure and effecting the well being of our very own citizens because the consumer in this country has not shown ANY loyalty to our own. The quality is there...I have owned a number of Volvo automobiles and even drive a XC-90 that has six figure mileage and has performed wonderfully, safe and looks great...so yes that cost more or you can get into a little box from Toyota or KIA or some other asian maker and help their economy and technical base while our country's auto makers continue to lose ground...your choice just remember the real agenda of the Japanese and their government they hate us and they are inviserating us because we let them...WAKE UP and BUY AMERICAN ONLY.
5-21-2008 @ 8:51AM
nate said...
Dan, your argument to "buy American only" doesn't make sense. Toyota builds quite a few of its cars here in America, so buying a Toyota actually does help American workers. On the other hand, Ford and GM build a lot of their cars in Mexico and Canada. So much for "helping to keep America strong". And no, the Japanese don't hate us, they're just conducting good business. Don't be upset that they're doing just as good if not better work for less money. You can't win 'em all, and you shouldn't "take your ball and go home" when you do lose one.
5-21-2008 @ 8:51AM
Patheat said...
Oldsmobile, in fact, in my book, could STILL be sold to a Chinese or Indian company, helping to defray the exhorbitant cost of "just shutting it down";
Oldsmobile was TAKEN by Toyota, basicly for free when GM didnt renew the copyrite for the brand.
5-21-2008 @ 9:04AM
LinersExpress said...
Patheat wrote "Oldsmobile was TAKEN by Toyota, basicly for free when GM didnt renew the copyrite for the brand."
Patheat, This was an April Fools Joke I don't think you read the entire article
5-21-2008 @ 9:07AM
lee scott said...
I own 2 Volvos...The 1999 is a good car, but my favorite is the 94...I replaced a starter after turning over the 340,000 mile mark and that's the only replacement part that I have had to purchase since buying the car. The 99 simply doesn't have the same quality as the 94 and overall, and after owning a total of 6 Volvo's, I have found them to be the very best built auto's out there.
5-21-2008 @ 10:01AM
chas said...
sell. Ford and. Volvo don't belong in the same sentence together. Better still, spin it off for the sake of battered stock holders. self dicks @ Ford.
5-21-2008 @ 10:12AM
cctgos said...
Volvo was a great car when Sweden was a socialist state but when it wen capitalist they went to hell and when FORD got them they turned in the 1980' Flairmonts of the Euro Line.
Many breakdowns that never happen before, they adopted the Ford concept of out the door and repair on the floor.
5-21-2008 @ 10:13AM
Leo said...
Volvo was a great car when Sweden was a socialist state but when it wen capitalist they went to hell and when FORD got them they turned in the 1980' Flairmonts of the Euro Line.
Many breakdowns that never happen before, they adopted the Ford concept of out the door and repair on the floor.
5-21-2008 @ 10:16AM
Cpt-D said...
Nate- I disagree. Jap cars built here in the US do pay the workers,but, the bottom line-the Corporations are owned in Japan and that is where the profit goes! Of course if you are a Coproration hater because they make money, I suppose you can send a message by helping out the Japs!- - Buy American!
5-21-2008 @ 10:23AM
Mark said...
Ford Motor Co. wants to sell Volvo because they cannot send it to Mexico to be produced at 2 dollars an hour. Wake Up Americans!!! When you buy a Ford you are now buying a foreign built Automobile. Ford doesn't want Americans to compete anymore, and are now exploiting the Mexicans. Thanks to NAFTA they can now assemble in Mexico and return them to the U.S. duty free.
5-21-2008 @ 10:25AM
steven said...
TO NATE - - -
nate said...
Dan, your argument to "buy American only" doesn't make sense. Toyota builds quite a few of its cars here in America, so buying a Toyota actually does help American workers. On the other hand, Ford and GM build a lot of their cars in Mexico and Canada. So much for "helping to keep America strong". And no, the Japanese don't hate us, they're just conducting good business. Don't be upset that they're doing just as good if not better work for less money. You can't win 'em all, and you shouldn't "take your ball and go home" when you do lose one.
Ultimately the profits of a vehicle sold go to the manufacturer. thus if you buy a Toyota/honda/kia/etc. you are lining the pockets of Japanese/Korean/etc companies. where the vehicle is actually put together is of little consequence in the grand scheme of things. These toyota/honda's that are MADE IN AMERICA are made from parts manufactured in JAPAN, out of JAPANESE STEEL and PLASTIC. They ship all the dam* parts over here. tell me again how this helps america? i understand that they are giving jobs to several thousands of americans, but in the grand scheme of things toyota/honda are hurting america's auto/steel/plastic/electronic industries.
5-21-2008 @ 10:45AM
Jeff J. said...
To the "BUY ONLY AMERICAN" subscribers. If the truth were to be spoken (and these days it seldom is), it would have to be pointed out that the current slump in American product sales has to do with the AMERICAN businessmen who run those businesses. After years of turning a blind eye to the realities of a developing international economy, getting into bed with the oil companies who bleed us mercilessly, and bribing the government representatives who have failed to protect us, the American auto companies now want our loyalty??!! Apparently, we sheep are supposed to be completely unaware of any of this and blindly follow the blindest, who have led us for so many years. The days of obfuscation and legalized grand theft auto are over. Please save yourselves your last vestige of dignity, admit to your corporate greed and sinfulness, get focused and produce cars that are desirable for the right reasons. Show the world that American makers are capable and still have some integrity. Otherwise, accept the fate you have so deviously helped to design. It will be sad to see NO American cars able to compete in the future, but I think that's inevitable without a complete course correction.
5-21-2008 @ 10:56AM
bubba said...
I got my first Volvo in 1959-1960, wish I still had it. I could care less about ford and volvo now. There are more important things.....
5-21-2008 @ 11:14AM
Cpt-D said...
Jeff- WELL SAID - - Comrad!
5-21-2008 @ 11:30AM
Greezer said...
Ford and other American companies have changed their ways and brought their quality standards up to equal Japanese cars and in some cases exceeded them. But a lot of Yupies who think they know much about cars... and who don't really have a clue are the biggest supporters of Jap Crap.. so wake up America before it's to late...oh, Mister Yupie... remember the almighty Toyota Camry..best selling car in America..well check your facts...it's being outsold by F150 Ford Trucks and Silverado Chevy Trucks.... so the best selling vehicle in America is still an American Truck.