Ford Faqs

There are rumors that Ford and Volvo will be parting ways. Yet, Ford denies that they are talking with potential buyers. Because most of its assests promised to creditors. If they really want to do anything then they will have to save a large amount of the proceeds from the Volvo sale to repay their debts.

However, Rod Lache, analyst at Deutsche Bank, told clients on Tuesday that Ford has at least two good reasons to dispose of Volvo. First, a sale would simplify the parent’s operating structure and recovery ­strategy. Second, it would provide extra cash to restructure healthcare liabilities as part of forthcoming contract talks with the United Auto Workers’ union.

Jonathan Steinmetz, analyst at Morgan Stanley, added in a recent report that “Ford does not have the resources, from a financial or a managerial perspective, to keep ploughing time and money into all its brands”. A sale of Volvo would mark the final dismemberment of Ford’s upmarket car business outside North America, stitched together in the late 1980s and 1990s as its Premier Automotive Group (PAG).

Ford disposed of Aston Martin this year, and its financial advisers have set Thursday as the deadline for expressions of interest for Jaguar and Land Rover. Volvo has been by far the most profitable part of PAG and has made a significant contribution to development of other Ford products. For instance, the new North American Taurus saloon and Taurus X crossover vehicle, previously named the Five Hundred and Freestyle, are built on a Volvo platform.

Still, there is a widely held view that, as with numerous other US-European automotive partnerships, such as Daimler and Chrysler, and General Motors and Fiat, Ford has failed to realise Volvo’s full potential. Joe Phillippi, a New Jersey-based consultant, notes that Volvo was supposed to help Ford gain a foothold in the European premium car market. Instead, he says: “Ford has never been able to move its brand out of the everyman category.”

Volvo remains a niche brand in North America, which makes up more than a quarter of its sales, lacking the more broad-based appeal of Toyota’s upmarket Lexus and Honda’s Acura brands. Other carmakers, notably Honda, have stolen much of its thunder as a leader in vehicle safety. Volvo sold about 430,000 vehicles last year, well below the 650,000 target set by Ford.

Its market share in most countries is a modest 1-2 per cent, although the brand still accounts for roughly one in five cars sold in Sweden. While analysts expect that Ford could raise more for Volvo than the $6.5bn it paid in 1999, the sale price would also probably confirm that its eight-year investment has fallen short of being a stunning success.