The Financial times: Volvo is for sale.....

[TStag]

Source: http://www.ft.com/cms/s/b7d4f906-0ad1-11dc...0b5df10621.html

 

From the FT:

 

BMW among parties looking at Ford’s Volvo Cars, sources say

by Thomas Williams and Alessandra Castelli in London

 

Published: May 25 2007 16:17 | Last updated: May 25 2007 16:17

 

BMW, the German carmaker, is in informal talks to buy the Swedish car manufacturer Volvo Cars from its owner Ford, according to two sources close to the situation. One source said that the Bavarian car maker has examined the financials of Volvo Cars in recent months, and is now exploring a possible acquisition of the company. The source added that, however, other companies have also studied Volvo Cars‘ financials.

 

BMW and Ford declined to comment.

 

A second source, close to BMW, confirmed that a Volvo cars sale process is currently taking place. He also confirmed that BMW is looking at Volvo Cars’ books but does not believe that the German company will end up buying Volvo Cars.

 

“BMW has already everything that Volvo cars cannot offer,” the source said.

 

Several industry sources have downplayed the possibility that Volvo Cars could be an attractive target for private equity, in spite of the fact that Chrysler Corp was acquired by Cerberus Capital just two weeks ago. The sources argued that it would make no sense for a private equity firm to buy an automotive company, given their cyclical nature and the prospect for making large losses in a downturn.

 

“In this economy, where there are so many other opportunities, PE would prefer companies with strong cash flow and not car opportunities which make high leveraged companies dependent on strong cash flow,” one source said.

 

Hampus Engellau, an analyst at Handelsbanken Capital Markets, disagreed with this view, saying that private equity might find Volvo Cars’ recently updated range of models attractive because little investment would be required for renewal.

 

An industry source said he heard that Nordic Capital has expressed some interest in Volvo Cars in an attempt to return the brand back to its home market. A private equity director dismissed the idea, however, pointing out that a Volvo acquisition would likely be beyond Nordic Capital’s investment size criteria. Ford acquired Volvo in 1999 for USD 6.5bn.

 

Handelsbanken’s Engellau concurred, adding that an attempt to recreate a Swedish car brand through such a deal “makes no sense.”

 

Nordic Capital declined to comment.

 

Volvo Cars delivered 427,964 cars to consumers in 2006 down 3.6% from 443,947 in 2005. But the company has said it had a strong first quarter this year and is launching seven new models between 2006 and 2009. It sells cars in more than 100 countries but has a relatively small market share of 1-2% in its main markets of the US, the UK, Germany and Italy. However, Volvo is much stronger in Sweden where it is estimated that one in every five cars sold is a Volvo.

[TStag]

Before you say this is all rumour. Please bear in mind Autocar ran the same story about 2 weeks ago and the FT has a great reputation for getting it's stories right.

 

What is Ford playing at? Volvo is a core business. Selling Volvo is like selling Ford Europe. This is totally insane! Ford must be on the verge of bankcrupcy to consider such a move. Say bye, bye to your warranties, Ford must be dead.

 

What next for Land Rover and Jag? Are they planning to sell the best and most famous SUV car maker in the world? Are they going to try and sell Jaguar just as it closes in on profitability? PAG is one of the things Ford has going for it. No wonder BMW are eyeing them up and Toyota/ Hyundai bosses are allegedly considering an offer for Jaguar and Land Rover.

 

Give Mullaly his wings now so he can fly off! Get a car making man in like Lutz.

[goinbroke2]

"Volvo is much stronger in Sweden where it is estimated that one in every five cars sold is a Volvo."

 

Due to LOYALTY and the fact it was their own car at one time. Even owned by a foreigner, they are still loyal to the brand. Unlike certain people in north america.

[RichardJensen]

Before you say this is all rumour. Please bear in mind Autocar ran the same story about 2 weeks ago and the FT has a great reputation for getting it's stories right.

 

What is Ford playing at? Volvo is a core business. Selling Volvo is like selling Ford Europe. This is totally insane! Ford must be on the verge of bankcrupcy to consider such a move. Say bye, bye to your warranties, Ford must be dead.

 

What next for Land Rover and Jag? Are they planning to sell the best and most famous SUV car maker in the world? Are they going to try and sell Jaguar just as it closes in on profitability? PAG is one of the things Ford has going for it. No wonder BMW are eyeing them up and Toyota/ Hyundai bosses are allegedly considering an offer for Jaguar and Land Rover.

 

Give Mullaly his wings now so he can fly off! Get a car making man in like Lutz.

1) Autocar's story was entirely in the PAST TENSE, and referred to goings on in January, where BMW sought access to Volvo's financials.

 

2) The FT is definitely NOT the WSJ, and if it is more reliable than the Sun (or the Mail) it is less reliable than the Wall Street Journal.

 

3) I'm sure Ford would sell Volvo. If the price was right. Is the price likely to be right? No.

[TStag]

1) Autocar's story was entirely in the PAST TENSE, and referred to goings on in January, where BMW sought access to Volvo's financials.

 

2) The FT is definitely NOT the WSJ, and if it is more reliable than the Sun (or the Mail) it is less reliable than the Wall Street Journal.

 

3) I'm sure Ford would sell Volvo. If the price was right. Is the price likely to be right? No.

 

In my experience the FT is very reliable. During the MG Rover saga they were always the best paper to read if you wanted accurate information. The FT is certainly not in the business of making things up. In the UK they are the only paper you can trust. As for the Wall Street Journal then that's more like the Daily Star than the FT.

 

If Volvo goes the next question will be when will they sell Land Rover and Jag? If they don't sell Land Rover then I guess we can expect to see Land Rover make Volvo type car as Ford get's desperate to make cash. Screw down the furniture or it will go in the Ford summer sale.

[RichardJensen]

1) How come the FT didn't uncover the bad behavior (or, I should say, 'behaviour') of the UK owners of MG/Rover? If they're such a great paper, they should've been able to figure out what those idiots were doing practically in plain sight. The WSJ, OTOH, brought down Enron. And having read and subscribed to both, I would take the WSJ over the FT any day of the week and twice on Sundays.

 

2) It is unlikely that BMW wants to spend what Ford would ask for Volvo.

[2005Explorer]

All I am going to say is that if Ford sells Volvo or their share in Mazda they are loosing their minds, or really are completely bankrupt. Considering they are using safety technology from Volvo (AdvanceTrac RSC) and chassis designs from Volvo (D3) it would be crazy to sell them. One thing that Volvo has done for Ford is improve their safety image. Imagine if it is sold and then Ford has to start taking the Volvo improvements out of their vehicles. Not a good idea. I say sell whatever you need to sell, but Volvo and Mazda should be protected and used to benefit North American operations.

 

Last, I would think Ford would want a HUGE $$$ for Volvo considering they would be loosing a lot of engineering and sharing capacity.

[Edstock]

Does BMW really need Volvo?

 

Sure, they have the FWD MINI division, but the heart of BMW's "schtick" is a basically RWD chassis lay-out, which remains competitive even down to the C-minus-size with the 1-series. In short, why buy all that FWD/AWD tooling?

 

For less than what it would cost to buy the right to make BMW-Volvo's, BMW could build more BMW-BMW's. And if BMW still wants to get into the larger FWD/AWD arena, their MINI brand is just fine: the MINI MAXI :happy feet:

[TStag]

Does BMW really need Volvo?

 

Sure, they have the FWD MINI division, but the heart of BMW's "schtick" is a basically RWD chassis lay-out, which remains competitive even down to the C-minus-size with the 1-series. In short, why buy all that FWD/AWD tooling?

 

For less than what it would cost to buy the right to make BMW-Volvo's, BMW could build more BMW-BMW's. And if BMW still wants to get into the larger FWD/AWD arena, their MINI brand is just fine: the MINI MAXI :happy feet:

 

According to Autocar BMW want Volvo (or someone like them) so that they can share more MINI components with the purchased company. Thus making MINI more profitable. In otherwords MINI is doing well but it would do better if it could share parts with another company.

[RichardJensen]

According to Autocar BMW want Volvo (or someone like them) so that they can share more MINI components with the purchased company. Thus making MINI more profitable. In otherwords MINI is doing well but it would do better if it could share parts with another company.

It's possible they thought Ford would be a 'motivated seller.' However, Ford is in no rush to part with any of their assorted operations. One need only compare the length of time Ford took to sell Aston Martin with the speed with which DB unloaded Chrysler.

 

Possibly a few execs at BMW saw financial problems at Ford and thought, "Hey, maybe we can pick up Volvo for a song!"

[68Cougar]

I think Richard is right on this one.

 

 

Next we will be hearing that Ford is selling Mercury! What will be come of Lincoln if this should happen!? :happy feet:

[TStag]

It's possible they thought Ford would be a 'motivated seller.' However, Ford is in no rush to part with any of their assorted operations. One need only compare the length of time Ford took to sell Aston Martin with the speed with which DB unloaded Chrysler.

 

Possibly a few execs at BMW saw financial problems at Ford and thought, "Hey, maybe we can pick up Volvo for a song!"

 

A few weeks ago Volvo trucks also said it is interested in buying Volvo cars back. So it could be that Ford is floating the idea with possible buyers.

[RichardJensen]

Or it could be they're reading the same articles the rest of us are.

[TStag]

One possible explanation for a Volvo sale could be that Land Rover is arguably a strong enough brand to conquer the premium car market by itself. If rumours are true, Land Rover now makes more money than Volvo anyway. Ford have also recently bought the Rover brand so the oportunity would exist to start making new Rover's in the UK and elswhere. This would allow Ford to take Halewood and it's UK plant's to capacity whilst tapping into low cost plants elsewhere. Rover then becomes the new Volvo and the UK becomes an almost single location for Ford's Premium car making activities. I'm speculating wildly on this but relaunching Rover or expanding Land Rover instead of continuing with Volvo would see greater efficiencies in the long term.

[jpd80]

Could it be that BMW is looking at a stake in Volvo and not a full buy out?

This would give them the all access they want at a fraction of the cost.

[g48150]

$20 says it Schultz cause he's pissed that Mark Fields gets the jet to Miami and he's stuck in podunk Europe...

[68Cougar]

A few weeks ago Volvo trucks also said it is interested in buying Volvo cars back. So it could be that Ford is floating the idea with possible buyers.

I doubt that very much. There isn't any rational reason why Volvo AB would want to get back into the car business.

[matthewq4b]

There is a case for selling Volvo.

 

Currently Ford does share platforms with Volvo and has gained a pile of knowledge in safety and other areas. But what is Volvo going to add to Ford in the next decade? All the Volvo Platforms will need replacement in the next few years. And will have to share Ford ones that will need specific and costly adjustments to Fit the Volvo product line.

 

Basically I see it this way Ford gained a lot with the purchase of Volvo, but what are they going to add in the future ?

 

They raided the company for product and experience. Now if they can dump it and make a profit at it.......

Ford has gotten the purchase price of Volvo out in product platforms and technical expertise. Volvo does not owe Ford any thing.

 

Dumping Volvo means one less unique car line to spend Money on to update and upgrade. The resources and cash used in in Volvo can be put to better use in core Ford, Mercury and Lincoln products to combat the imports. Volvo is not going to be stealing large numbers of sales from Yota and Honda no matter how you cut it.

Volvo is not a high volume manufacturer and I imagine the profits (if any) from Volvo are slim at the best.

I do not think that Dumping Volvo is a smart move or a stupid one. I think it is more about number crunching and the right price.

 

If Ford is going to Drop it, it has to be done now while they still have current viable product. And can get good money for it.

I'm not sure what Ford will gain from keeping Volvo in the long term.

In the short term they will make a wad of cash off it.

 

Maybe I'm missing some thing here. But I just do not see what Volvo will add in the long term.

Ford has excellent safety now ( on things other than Volvo based platforms) the whole safety argument for keeping Volvo is not a valid excuse now as Ford engineers have stripped all that knowledge from Volvo by now.

Volvo brings really no engine tech to Ford. And what they could have has been used.

I just do not see Volvo adding any thing significant to Ford in the long run.

But I do see Volvo being a drain on resources in the long run.

 

They are never going to be a high volume high profit manufacturer under Ford.

So might as well sell it when Ford can get a good buck for it and they need the cash. Again it will probably be a Deal like AM where Ford retains a percentage any way.

That way they can still see some returns if it does not fail and tech share with the new owners with out out having to lay out big bucks with little or no risk of Volvo sales cutting in to Ford Product lines.

 

This might be a smart move in the long run.

 

Matthew

[Misteredog]

There is a case for selling Volvo.

 

Currently Ford does share platforms with Volvo and has gained a pile of knowledge in safety and other areas. But what is Volvo going to add to Ford in the next decade? All the Volvo Platforms will need replacement in the next few years. And will have to share Ford ones that will need specific and costly adjustments to Fit the Volvo product line.

 

Basically I see it this way Ford gained a lot with the purchase of Volvo, but what are they going to add in the future ?

 

They raided the company for product and experience. Now if they can dump it and make a profit at it.......

Ford has gotten the purchase price of Volvo out in product platforms and technical expertise. Volvo does not owe Ford any thing.

 

Dumping Volvo means one less unique car line to spend Money on to update and upgrade. The resources and cash used in in Volvo can be put to better use in core Ford, Mercury and Lincoln products to combat the imports. Volvo is not going to be stealing large numbers of sales from Yota and Honda no matter how you cut it.

Volvo is not a high volume manufacturer and I imagine the profits (if any) from Volvo are slim at the best.

I do not think that Dumping Volvo is a smart move or a stupid one. I think it is more about number crunching and the right price.

 

If Ford is going to Drop it, it has to be done now while they still have current viable product. And can get good money for it.

I'm not sure what Ford will gain from keeping Volvo in the long term.

In the short term they will make a wad of cash off it.

 

Maybe I'm missing some thing here. But I just do not see what Volvo will add in the long term.

Ford has excellent safety now ( on things other than Volvo based platforms) the whole safety argument for keeping Volvo is not a valid excuse now as Ford engineers have stripped all that knowledge from Volvo by now.

Volvo brings really no engine tech to Ford. And what they could have has been used.

I just do not see Volvo adding any thing significant to Ford in the long run.

But I do see Volvo being a drain on resources in the long run.

 

They are never going to be a high volume high profit manufacturer under Ford.

So might as well sell it when Ford can get a good buck for it and they need the cash. Again it will probably be a Deal like AM where Ford retains a percentage any way.

That way they can still see some returns if it does not fail and tech share with the new owners with out out having to lay out big bucks with little or no risk of Volvo sales cutting in to Ford Product lines.

 

This might be a smart move in the long run.

 

Matthew

 

Except that all current Volvos share platforms with Fords, the XC90 V70 &S60 with the Ford D3s, the S80, future V70, S60, XC70, with the new Ford Mondeo, the S40, V50, C30 & C70 with the euro Focus. In addition the new Volvo sixes are shared with Jaguar/LandRover, the new top engine in the Mondeo and Ford S Max is a Volvo 2,5 litre turbo 5 cyl. and several euro market Volvos carry Ford Duratech 4 cyls. as their base engines. The only engines which Volvo seem to have exclusively now are their 5 cyl. diesels and the Yamaha built V8. Teasing apart Ford and Volvo could be a real logistical, financial, and legal nightmare for any potential buyer. Might Ford be willing to sell it though? Yes, if the price is right. But who would be willing to buy it at that price?

[matthewq4b]

Except that all current Volvos share platforms with Fords, the XC90 V70 &S60 with the Ford D3s, the S80, future V70, S60, XC70, with the new Ford Mondeo, the S40, V50, C30 & C70 with the euro Focus. In addition the new Volvo sixes are shared with Jaguar/LandRover, the new top engine in the Mondeo and Ford S Max is a Volvo 2,5 litre turbo 5 cyl. and several euro market Volvos carry Ford Duratech 4 cyls. as their base engines. The only engines which Volvo seem to have exclusively now are their 5 cyl. diesels and the Yamaha built V8. Teasing apart Ford and Volvo could be a real logistical, financial, and legal nightmare for any potential buyer. Might Ford be willing to sell it though? Yes, if the price is right. But who would be willing to buy it at that price?

 

 

Sort of makes the case right there, Ford has taken every thing outta them that they can. The next gen of vehicles they will have to be putting stuff back in to Volvo.

 

As I said what is Volvo going to contribute long term, say the next decade?

 

 

Separating Volvo from Ford is not some thing that would happen over night and obviously there would have to be a period of transition and tech sharing from the new owners to Ford during the transition. Ford is not going to hand over every thing with no compensation.

 

BMW makes an interesting case for buying Volvo. Currently the bulk of their stuff is RWD and the FWD they do have are not exactly the most reliable units on the road.

If BMW does not expand their market segments they will never expand and possibly eventually fail.

The purchase of Volvo is a far a cheaper solution for them than starting from scratch. It may also allow Ford to get some of BMW's tech. They sure could use some of BMW's diesel and RWD tech. BMW for the most part would have no problem replacing the Ford power plants over the span of a few years. They already build and design engines for other Manufacturers so swapping out the Ford engines should not be much of an issue.

 

 

Matthew

[suv_guy_19]

Sort of makes the case right there, Ford has taken every thing outta them that they can. The next gen of vehicles they will have to be putting stuff back in to Volvo.

 

As I said what is Volvo going to contribute long term, say the next decade?

Separating Volvo from Ford is not some thing that would happen over night and obviously there would have to be a period of transition and tech sharing from the new owners to Ford during the transition. Ford is not going to hand over every thing with no compensation.

 

BMW makes an interesting case for buying Volvo. Currently the bulk of their stuff is RWD and the FWD they do have are not exactly the most reliable units on the road.

If BMW does not expand their market segments they will never expand and possibly eventually fail.

The purchase of Volvo is a far a cheaper solution for them than starting from scratch. It may also allow Ford to get some of BMW's tech. They sure could use some of BMW's diesel and RWD tech. BMW for the most part would have no problem replacing the Ford power plants over the span of a few years. They already build and design engines for other Manufacturers so swapping out the Ford engines should not be much of an issue.

 

 

Matthew

 

 

How do yo really know that it would be cheaper for BMW...and ford still has gains that can be made...there are still the original volvo engineers...safety technologies...other thingns that they will come up with...ford still has gains to make...and they are very integrated....selling them would not be easy.

[Edstock]

They sure could use some of BMW's diesel and RWD tech.

 

Matthew, really.

 

Ford's own R&D and its alliance with Citroen-Peugeot has produced diesel tech second to none: just check out the Dagenham factory with the clean-room assembly. Plus, Ford has access to Volvo's 5-cylinder diesels as well.

 

So, Ford sure couldn't use some of BMW's diesel tech. It's just that all those wonderful engines aren't here yet.

 

Now, for BMW's RWD tech that Ford could ostensibly use. Yep, the company that developed Control Blade sure could use help getting those V-8 Falcons to handle properly, and the Mustang is such a pig.

[7Mary3]

I think the only company Ford really needs to keep is Mazda. I would rather see Ford sell Jaguar before Volvo though. Even if they have to pay someone to take it.

[TStag]

Why not sell Ford Europe? PAG makes twice as much money and has to work half as hard to make it. Let's be totally honest and just acknowledge that this is a desperate move by a company in desperate trouble. How can anyone in their right mind ay Volvo is'nt a core operation. It makes cars and uses lots of Ford components. Once you take away over 400,000 sales from Ford Europe by selling Volvo what do you think it will do to Ford Europe's economies of scale? For every floorpan shared Volvo is absorbing some cost. In he future that will go. So the cost of a Ford floorpan will rise.

 

There is only one possible logic in doing this that I can see. In Land Rover Ford has an arguably more profitable, prestigeous and cooler brand than Volvo. It has a large high tech UK car production facility in Halewood and a big engine plant in Dagenham. In Solihull there is also some spare capacity. It could be that Ford will inject some more cash into Land Rover and tell them to start making premium passenger cars. It would be a gamble but Ford has enough facilities in the UK to make this work and work much more efficiently than Volvo. Trouble is it might take a decade to really replace Volvo.

[matthewq4b]

Matthew, really.

 

Ford's own R&D and its alliance with Citroen-Peugeot has produced diesel tech second to none: just check out the Dagenham factory with the clean-room assembly. Plus, Ford has access to Volvo's 5-cylinder diesels as well.

 

So, Ford sure couldn't use some of BMW's diesel tech. It's just that all those wonderful engines aren't here yet.

 

Now, for BMW's RWD tech that Ford could ostensibly use. Yep, the company that developed Control Blade sure could use help getting those V-8 Falcons to handle properly, and the Mustang is such a pig.

 

 

Yes Ford is working on new Diesel tech. But they are working on building what BMW already has.

BMW's 3.0L Diesel is making 290 Hp with 425 Ft lbs of torque and getting 40+MPG combined in the 5 Series. Ford can not even get these kind of HP Figures out it's gasoline engines.

Ford and Citroen are working to match figures like this. Do not think that BMW's diesel program has nothing to offer.

 

Volvo's sales have been slipping worldwide even with some new and fantastic product Sales are still slipping. And again they will never gain the sales from where Ford needs them the most, the Asian imports. Volvo's 400K sales are Global and it costs a lot more to sell 400K cars globally than it does in one country. That is also less than what Ford has lost each Year in NA alone due to archaic product. And those sales for the most part are going right to the Asians.

Mazda on the other has and is stealing Sales from them, and that directly benefits Ford.

 

I,m not convinced that Volvo is going to show any measurable benefit in the future compared to the money to be made by selling them now. I,m not sure Volvo has any thing of substance to offer Ford in the long run. They have a better then average chance of becoming a liability and not an asset in the future. I do not think Volvo has any more advanced engineering information to offer to Ford at this point. Ford has basically stripped them of every thing they have and had and need for the immediate future.

 

Eventually Ford is going to have to start putting back in to Volvo and with the way things have been going for Volvo I,m not sure that they would ever see a return on that investment.

 

For BMW to move in to this segment with FWD, purchasing Volvo Is a far cheaper solution as they are walking in to a Turn key operation. And would not spend literally billions and years developing each vehicle. Even if it was not cheaper (Which is doubtful) they would see returns much faster than starting from scratch. And that would be cheaper in the long run.

Volvo is in good shape right now to command some preimum dollars. This will not be the case in a year or 2.

 

Does Ford Need to keep Volvo, absolutely not. Do they Need to sell it again absolutely not.

 

No one has said what advantage long term is there is for Ford in keeping Volvo. Volvo's long term and near term success is in question. Weather the money from the sale is needed or not is not in question.

 

As I said it will come down to a numbers game. Ford does not have to keep Volvo nor do they need to sell it. If the bean counters can get the right price for it and figure it would be in Ford's Best interest to sell it now and get the desperately needed operating and R&D capital they most likely will.

 

Matthew