Ford must resist the temptation to sell Volvo

[Biker16]

Ford must resist the temptation to sell Volvo

 

Automotive News Europe

July 23, 2007

 

 

 

Ford Motor CEO Alan Mulally must resist the urge to sell Volvo.

 

Mulally has been on a fund-raising mission since he arrived at Ford last autumn from the aircraft maker Boeing. He pledged all the company’s assets, including Volvo, to raise $23 billion (currently €16.7 billion) in loans to fund Ford’s restructuring plan in North America.

 

Mulally has been steadily dismantling the troubled Premier Automotive Group, the collection of European premium automakers Ford created after a buying spree in the late 1990s. That is understandable. The group has lost $4.8 billion over the past three years.

 

Mulally sold off Aston Martin to British entrepreneur David Richards in March for $848 million. He has put luxury SUV maker Land Rover and perpetual money-loser Jaguar up for sale -- a move perhaps aimed more at cutting losses than raising much cash.

 

Mulally is under pressure. The controlling Ford family has ordered him to return the automaker to profitability by 2009. Ford lost

 

$12.7 billion in 2006, and although its shortfall was only $282 million in the first quarter, analysts expect another big loss in second-quarter results that are due this week.

 

Ford executives’ support for Volvo appeared solid until last week. Reports that Ford is now thinking about selling Volvo could be a sign that Americas President Mark Fields’ turnaround plan is not meeting its goals.

 

But if that is the case, better to create a new plan from a new author than to sell one of Ford’s most dependable profit-making units.

 

Despite huge losses at PAG as a whole, Volvo is the one deal that has paid back Ford with profits and useful technology. Company insiders say Volvo delivers profits of $800 million to $1.2 billion a year to Ford.

 

But Volvo’s value to Ford goes much further. Virtually synonymous with safety, the Swedish carmaker has one of the strongest brand images in the global auto industry.

 

The Volvo brand is upscale, but not too far into the luxury realm. Its technology can be shared with other Ford brands without offending the Volvo faithful. Volvo engineering and technology are now cornerstones of key products in Ford’s global lineup.

 

In addition, any gains from selling Volvo would be reduced by the need to refinance any Ford loans secured by Volvo assets.

 

Assuming Ford successfully turns itself around, its future profitability would be greatly reduced if it sells a consistent moneymaker.

 

It would be like a craftsman selling his gold-smithing tools to save his blacksmith business. He can still make a living hammering out horseshoes, but he’ll never be as prosperous.

 

Mulally’s mission to revive Ford Motor has been to cut unneeded costs and capacity. Units such as Jaguar have been nothing but a drag on the automaker. But Volvo has made Ford stronger, and with a renewed product lineup now reaching the market it will keep doing so.

 

Selling Volvo would be short sighted, and a mistake. Ford should not do it

[Joe771476]

Couldn't have said it better myself!

[FLLMTR]

I don't know. I believe that the reason PAG failed is because people who want to buy a domestic/American car would not consider a Jag or Land Rover over a Cadillac. And the buyers who would consider an import luxury vehicle would not choose a Jag or Land Rover over a Lexus, BMW or Mercedes.

 

Ford has to sell of PAG.

 

Now as far as Volvo goes, again, it falls into the same trap. Granted Ford has incorporated roll stability control and other safety technology to make the Explorer and Taurus/Five Hundred two of the safest vehicles on the road. But unless Volvo styling can compete with Lexus or BMW, it is hard to justify keeping it when it may be wise to sell off or spin off its controlling shares in it.

 

Just my two cents.

[SVT_MAN]

It would be like a craftsman selling his gold-smithing tools to save his blacksmith business. He can still make a living hammering out horseshoes, but he’ll never be as prosperous.

 

I think this analogy is a bit of a stretch. I do agree that selling Volvo is a mistake because they can utilize "trickle-down" on the technology end of things.

 

FLLMTR:

 

Luxury cars are more about perception and reputation than anything else. Jaguars have traditionally been known as the "mechanic's friend", and even after nearly 20 years of being under Ford's reign, this is STILL what people think when they think of Jaguar. The amazing thing is, Jaguar consistently outscores BMW on everything like that, but it consistently undersells EVERYTHING pretty much. People I talk to still think that Jaguars are terribly unreliable, finnicky cars. Perception lags reality a ton.

 

When we bought our first Jaguar, the first thing everybody who talked to us would say was "Man, that's a nice looking car. Too bad that those cars are such money pits, huh?"

 

Nobody gets it. Jaguar never advertises the fact that they are reliable - why SHOULD people get it? I've said it before and I'll say it again: Ford's BIGGEST problem is actually their advertising, NOT their cars.

 

Our two Jaguars (1996 XJ6, and 2000 XJ8L) have been the best cars we've ever owned. We didn't even buy them new, and reliability has been excellent. In fact, we've had less problems with our Jaguars than ANY other car we've owned (minus our 1999 Mustang GT which is has been flawless throughout its life).

Edited August 2, 2007 by SVT_MAN

[silvrsvt]

Luxury cars are more about perception and reputation than anything else. Jaguars have traditionally been known as the "mechanic's friend", and even after nearly 20 years of being under Ford's reign, this is STILL what people think when they think of Jaguar. The amazing thing is, Jaguar consistently outscores BMW on everything like that, but it consistently undersells EVERYTHING pretty much. People I talk to still think that Jaguars are terribly unreliable, finnicky cars. Perception lags reality a ton.

 

perception is what is hurting GM and Ford right now too...

[SVT_MAN]

perception is what is hurting GM and Ford right now too...

 

True enough, but I can tell you from personal experience that a lot of cars Ford built under the Ford, Mercury, and Lincoln nameplates in the 90s truly were crap. We owned a lot of 1990s Sables, and I currently drive a 1995 Mercury Sable LS. It's not a bad car per say, to drive at least - but I've had almost EVERYTHING replaced on it at least once. The suspension seems about as fragile as a porcelain doll. The engine has been replaced (for free) under Ford's recall of the 3.8L V6.

 

It's just a fragile car that was built like many GMs were 10 years before that. Our 1989 Sable, on the other hand, was solid as a rock. We were very disappionted with the second generation Taurus / Sable models.

[silvrsvt]

It's just a fragile car that was built like many GMs were 10 years before that. Our 1989 Sable, on the other hand, was solid as a rock. We were very disappionted with the second generation Taurus / Sable models.

 

Thats strange, my parents Taurus Wagon went to the dealership 13 times for repairs/recalls and the transmission puked at 56K and 102K...my old man said if he didn't work for Ford, he wouldn't buy another. Then again the 02 Explorer they have has had major transmission problems this past July and last July also..

[fbmphil]

I think this analogy is a bit of a stretch. I do agree that selling Volvo is a mistake because they can utilize "trickle-down" on the technology end of things.

 

Unless Ford has already milked Volvo for all they're worth, and now possess the technological know-how to develop these technologies themselves. There's only so much trickle down.

[FordBuyer]

IMO, the only thing that matters right now is stabilizing and then growing North American market share without giving cars away. Until they do that, selling or not selling Volvo is a moot point. All effort and money has to go to North America right now until it can be shorn up. If Ford can not shore up North American Operations, then the company won't survive long term no matter what Ford does in other regions.

 

If Mitsubishi can come back from the dead, and Ford turned around Europe with new product, then Ford should be capable of turning around North America. I don't really think Ford has put full effort into North America yet. I think they are slowly realizing that they better do something soon or it will be too late. Ford cannot show double digit sales declines in 2008 if it wants to survive. It has to stop bleeding this year and show some kind of stabilization next year. It's getting to where I cringe every time I read montly sales figures. Fusion sales for July are horrible and I see no reason for such abysmal figures. Almost 4,000 dealers nationwide and that is the best they can do?

[jpd80]

Ford must resist the temptation to sell Volvo

 

.....Despite huge losses at PAG as a whole, Volvo is the one deal that has paid back Ford with profits and useful technology. Company insiders say Volvo delivers profits of $800 million to $1.2 billion a year to Ford.

 

I can see TStang now..........Noooooo!..........

[igor]

I disagree, but that is just me.

 

Igor

[Blueblood]

Thats strange, my parents Taurus Wagon went to the dealership 13 times for repairs/recalls and the transmission puked at 56K and 102K...my old man said if he didn't work for Ford, he wouldn't buy another. Then again the 02 Explorer they have has had major transmission problems this past July and last July also..

 

 

What? I thought ford was perfect??

 

You're just a negatard!

[SVT_MAN]

Thats strange, my parents Taurus Wagon went to the dealership 13 times for repairs/recalls and the transmission puked at 56K and 102K...my old man said if he didn't work for Ford, he wouldn't buy another. Then again the 02 Explorer they have has had major transmission problems this past July and last July also..

 

I've heard it time and time again how Ford trannys suck. We've never had problems with them. I guess it must be the transmission combos we get with the 3.8L, but we never have transmission problems with our Sables. We always bought the gas-hog 3.8L, and we never had problems. In fact, the transmission is about the only thing on the cars we never had to replace.

 

And, by the way, I'm not sayin that the newer products Ford is making are crap. If I had the money, I'd buy a Fusion. I think it's an excellent car. But, the Taurus just plain became a junk heap when Ford started cost cutting on it.

Edited August 2, 2007 by SVT_MAN

[suv_guy_19]

What? I thought ford was perfect??

 

You're just a negatard!

 

 

 

when did he ever say that ford was perfect...your getting as bad as pc, you have to make things up now?...your really obviously not very happy here, maybe you should find something else to do with your time....short attention span and all....

[silvrsvt]

What? I thought ford was perfect??

 

You're just a negatard!

 

 

Your a fucking Moron...

[silvrsvt]

I've heard it time and time again how Ford trannys suck. We've never had problems with them. I guess it must be the transmission combos we get with the 3.8L, but we never have transmission problems with our Sables. We always bought the gas-hog 3.8L, and we never had problems. In fact, the transmission is about the only thing on the cars we never had to replace.

 

And, by the way, I'm not sayin that the newer products Ford is making are crap. If I had the money, I'd buy a Fusion. I think it's an excellent car. But, the Taurus just plain became a junk heap when Ford started cost cutting on it.

 

The parents wagon was a 3.8L also

[SVT_MAN]

The parents wagon was a 3.8L also

 

In that case, we must be lucky or good :P

[Harley Lover]

although its shortfall was only $282 million in the first quarter, analysts expect another big loss in second-quarter results that are due this week.

 

I still love this every time I read it. If the so-called analysts can miss so badly, what else are they completely wrong about? :shades:

Edited August 2, 2007 by Harley Lover

[TStag]

I think Ford must begin by asking itself the following questions:

 

- If PAG is sold off how will Ford compete with luxury brand's from mainstream competitors like GM, Toyota, Honda, Nissan, VW and Fiat?

- If the answer is Lincoln then how will Lincoln fund models that can be viewed as serious rivals to cars from the above? How can they sell in more markets?

 

 

Answer those questions satisfactorily and it really becomes a case of should Ford sell Ford to focus on Ford, or should Ford try and turn the whole ship around?

 

Personally I fail to see how Ford can build a premium strategy around Lincoln and execute it globally. Selling PAG and especially Volvo goes against what all their main rivals are doing.

[LincolnFan]

Answer those questions satisfactorily and it really becomes a case of should Ford sell Ford to focus on Ford, or should Ford try and turn the whole ship around?

 

First of all, LINCOLN IS GLOBAL!! It's sold in Japan, Middle East, China, Mexico, Canadia.. and a lot of other countries except Europe. Europe will never buy an American Luxury Vehicle. hell even Lexus is outselling Caddy in Europe now THAT says something.

 

The MKX is already selling 3000 ~ 3500 per month, MKZ @ 3000 and more per month. I think this is a pretty good start for Lincoln's comeback, the MKS is coming and it's going to kick ass and take names if Lincoln prices it right.

 

Lincoln is a much much better brand than the forgotten Jaguar and the fix-it-again-Elizabeth Land Rover, Europe's luxury cars are facing a crisis anyway with the CO2 stuff.

 

Lincoln can compete and it's showing it with it's products, next year the MKZ will be refreshed and the MKS will come to haunt the imports with it's impressive 3.7L and 3.5 GTTDI engines.

 

What's better than a three-point star? a four point star.

[Bagrah01]

First of all, LINCOLN IS GLOBAL!! It's sold in Japan, Middle East, China, Mexico, Canadia.. and a lot of other countries except Europe. Europe will never buy an American Luxury Vehicle. hell even Lexus is outselling Caddy in Europe now THAT says something.

 

The MKX is already selling 3000 ~ 3500 per month, MKZ @ 3000 and more per month. I think this is a pretty good start for Lincoln's comeback, the MKS is coming and it's going to kick ass and take names if Lincoln prices it right.

 

Lincoln is a much much better brand than the forgotten Jaguar and the fix-it-again-Elizabeth Land Rover, Europe's luxury cars are facing a crisis anyway with the CO2 stuff.

 

Lincoln can compete and it's showing it with it's products, next year the MKZ will be refreshed and the MKS will come to haunt the imports with it's impressive 3.7L and 3.5 GTTDI engines.

 

What's better than a three-point star? a four point star.

 

You can't be serious. Really? Your joking right?

[LincolnFan]

You can't be serious. Really? Your joking right?

 

Tell me how I am joking.

[Bagrah01]

Tell me how I am joking.

 

You're talking about lincolns

[LincolnFan]

You're talking about lincolns

 

WTF is wrong with Lincolns? Why the hell does everyone in this site underestimates Lincoln?!

 

Back when Bill Ford took over and started making a list of the things that need to be fixed at Ford, the most important thing in the list was Lincoln, he underlined it three times.

 

Ford is finally serious about getting Lincoln back in the game.

[Bagrah01]

WTF is wrong with Lincolns? Why the hell does everyone in this site underestimates Lincoln?!

 

Back when Bill Ford took over and started making a list of the things that need to be fixed at Ford, the most important thing in the list was Lincoln, he underlined it three times.

 

Ford is finally serious about getting Lincoln back in the game.

 

 

Lincoln is to far gone to compete with the likes of any other luxury brand.