Volvo, once the success story in Ford's Premier Automotive Group, has hit choppy waters. And according to Wall Street Journal insiders, Ford is preparing to treat the Swedish automaker the same way it did the English ones: slap some floaties on it and keep the brand bobbing long enough to sell it.Volvo made $94 million in profit in Q1 of 2007, but lost $151 million in Q1 of this year. In total, over the past two years, the once smiling Swede has lost $1.7 billion, part of which is due to exchange rates, and another is due to selling fewer cars. To combat the decline, Volvo is shedding up to a third of its work force at one European plant, and cutting back on production at another. As you would suspect, both of those plants make the largest vehicles in Volvo's lineup.
A couple of weeks ago, Ford was intriguingly -- or deceitfully -- still in "Volvo's not for sale" mode. Now it appears that Mulally has admitted to some Ford execs that Volvo is about to wear the "Needs a Caring Home" sign. Jerry York, the right hand man of Kirk Kerkorian, maintains that Volvo will probably be sold in 18 months. The way things look now, we'd be surprised if it took that long.
[Source: Wall Street Journal via Yahoo!]
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Reader Comments (Page 1 of 2)
Avinash machado @ May 20th 2008 11:09AM
Well I hope Volvo goes back to European hands. Renault or BMW might make good owners.
SPG @ May 20th 2008 12:16PM
I very muchly agree with you.
icu812ru469 @ May 20th 2008 11:21AM
How to make a thriving, reputable, automaker into a stinker within a decade or two? Sell them to America for a few years...
AngeloD @ May 21st 2008 5:30AM
Like Diamler did a better job with Chrysler.
lithdoc @ May 20th 2008 12:49PM
Thriving and reputable? You must be talking about such cash cows like Volvo, SAAB, Rover and Fiat. None of these have made a dime before they were taken over.
Chris @ May 20th 2008 11:22AM
XC models of every line has gotten silly. That and having some models priced the same or higher than numerically superior models confused customers. Then there is that delightful 30 series that can't be properly optioned out here and has to be built and shipped reducing shopping satisfaction.
Once a brand distinguished by safety who let sight of the ball as now everyone touts safety. What is there to set them apart from other brands? Big red tail lights?
Chris @ May 20th 2008 2:05PM
Umm, actually, besides the "big red taillights", they are still one of the safest cars on the road. The engineering that goes into the structure of the cars, especially the larger "true Volvos" such as XC90, S80, V70 etc is superb. Lots of use of ultra high strength steel in pillars and door bars etc. These cars can take a massive hit and not cave in to the passenger compartment, I've seen it first hand as I'm a part time EMT. Mercedes, Volvo, BMW-those are the cars you want to be in when someone crosses the center line and hits you head on. Gov. crash data does NOT tell you the full story. I hope Volvo goes back to Volvo AG ownership, they place a high priority on the tradition of safety.
DJ @ May 20th 2008 11:33AM
Expect the Swedish government, a couple of Swedish biilionaires and Volvo management to step forward and put forth a purchase plan within 3 to 6 months. Because Ford relies much more heavily on Volvo for R&D than it did Jaguar/LR, it won't be a complete split. Probably more in the Ford/Mazda 65/35% setup.
Frank @ May 20th 2008 11:55AM
Agreed, much like mazda, Volvo is better for ford than ford is for volvo.
Stéphane Dumas @ May 20th 2008 12:36PM
I also agree, it would be more safer for Ford to keep a smaller stake in Volvo (like 25-35%) then selling completely to someone else.
#1 Avinash machado, BMW tried once to buy another automaker, the Rover group in the 1990s but it wasn't successeful. And the irony, there was some attempts of a merger between Renault and Volvo in the early 1990s but it was before the beginning of the privatization of Renault.
There a French article from the French newspaper Le Figaro who mentionned then Kerkorian probably wants Ford to "marry" another automaker. Possibly Renault-Nissan for some analysts but Carlos Ghosn said he don't want to invest in a entreprise still controlled by a family. http://www.lefigaro.fr/lefigaromagazine/2008/05/10/01006-20080510ARTFIG00547-ford-kirk-et-carlos.php
Tool @ May 20th 2008 11:44AM
I still think that it would make sense, from a strategic standpoint, for Ford Motor Company to keep Volvo.
BUT (and I repeat but) given the fact that they haven't shown any savvy whatsoever in managing Volvo or any other premium brand in its portfolio, Ford should get rid of it.
The other problem is that Volvo is really a niche premium brand that has limited appeal. The vehicles themselves are fine. To really make Volvo work, it would take considerable effort and patience over the next decade to make it work. And the problem is that Ford doesn't have that much time.
edward @ May 20th 2008 11:55AM
It's easy to think that, because my large flat screen monitor is in the closet for the time being and is worth a lot of money and because I'm feeling really poor; that it might as well be sold. On the other hand, the flat-screen should actually be linked up to my MacBook now and WILL continue to be useful into the future.
In other words, Ford should keep Volvo. Don't get greedy just cuz you could use the cash when there's a wonderful brand with long-term usefulness and impact sitting under your nose. Volvo ought to stop appearing so much under Recall banners, (http://goodcarbadcar.blogspot.com/search/label/Recall) as has recently been the unfortunate case.
MC @ May 20th 2008 12:05PM
So if Ford sells off Volvo to anyone but Volvo AG, what happens with the logo, the rights to the names, and the parts supply? Aren't those all still being supplied by Volvo AG under license to Ford?
volvfan88 @ May 22nd 2008 9:10AM
Volvo AB is the original Volvo company name and Volvo Personvagnar AB is the car division of Volvo which was sold to Ford back in 1999. Right now the way all of the economy is going Ford should sell Volvo as soon as possible before major loses come to light. If and when Ford sells Volvo they should bear in mind the ties that it needs to keep with Volvo Cars by selling majority of the shares and keepin a minority of at least 30 - 35% share in the Swedish company. About one year back a Swedish consortium had come foward to buy Volvo Cars from Ford. Ford needs to keep in mind if they want to keep the connection of technology and pwertrain from Volvo Cars they need to sell the company to a private owner instead of another automaker. BMW will not buy Volvo Cars at this point, nor will Renault becase of its global allaince with Nissan. Now in the interest of easy of operations, managment, funding, tech sharing, and flexibility the best candidate for a sale of Volvo Cars is to the Swedish investment consortium. The Swedish group consisted of the Investor AB which is owned by the wealthy Wallenburg family of Sweden and the other interest of the group was the Swedish Government and other Swedish private investors. If Ford should sell they should sell to the Swedish consortium allowing Volvo to be privately owned like Mazda but have the backing of a large automotive giant.
Noidor @ May 20th 2008 12:08PM
Ford has no money to keep Volvo competitive! Why is it so difficult to fathom? I have been right in predicting this for longest time...whether what would happen, or what should happen.
Ford's resources were being drained and in turn damaged Ford's budget, and failed to do anything worthwhile with Volvo.
Yes Volvo's platforms are well integrated into Ford, but there is no reason why that relationship couldn't continue after Volvo is sold.
Mercury will be killed relatively soon too.
psu48187 @ May 20th 2008 12:40PM
I suppose if Ford had no money to keep Volvo competitive we would have an S80/XC70/V70 with the shelf life of the current Saab 9-5 (what is it 11 years old now). Nor would we see an XC60.
Volvo's issues stem from product being stacked on top of each other. There is entirely too much overlap of the S40/S60 range. I could go on.....
I don't see Volvo going anywhere. I also don't see what Ford has done to the brand that was so wrong.
Stephen Lang @ May 20th 2008 12:15PM
I don't think they've done a horrible job with Volvo, the design of its current lineup is pretty good IMO. But its a niche brand that doesn't have the reach of BMW or Mercedes, yet has to compete with cars from those makers. I think under the best circumstances that's pretty tough going.
When PAG made sense, there was definitely room for Volvo. But now, not so much. The only brand Ford really needs to keep ties with Mazda.
Noidor @ May 20th 2008 12:34PM
Right. And what many people fail to understand is just how much effort is required to keep a brand competitive, year-on-year, on long-term basis.
Let's assume that Volvo is profitable this year (even though it is not!), next year, perhaps in 2010, but even then, there is very little guarantee that Ford would be able to provide enough budget allocation to keep Volvo competitive long-term without draining itself of valuable resources.
I think GM is in the same boat with Saab, and chances are that it'll be put up for sale relatively soon as well.
Only way to succeed in this business is to avoid playing favorites, not to be biased, look long-term and understand priorities. In other words be a damn realist.
rgt88@hotmail.com
mark belfast @ Jun 6th 2008 6:31AM
So true, Volvo has had the luxury of the investment Saab has been starved of for so long and yet it has been squandered on poor strategy - as you say 40/60 overlaps - who needs a 60? 80 seeming more and more irrelevant, all modesl being cloned from one aging design, 30 which nonoe needs or wants, 90 which did a great job but is also aging and 60 which has been hit with ugly stick. Saad as I used to rate Volvo but they have become pale, dull and disingenuous cardboard cutouts of the Ford parts bin. I hope they survive and return to form in independent European or Indian (jaguar) ownership, but can't see bidders queuing round the block?
Meantime Saab at last seem to be getting some injection from their US owners at GM, witness 9-4x, 9-x biohybrid and 9-3 Turbo-x. Too little too late, perhaps, but there is a distinct and exciting future there where Vovle has played all its cards already.
Gersonic @ May 20th 2008 12:32PM
No suprise here.
I've owned three V70 Cross Countries.
The new model stinks. It's heavier, has a less powerful engine BUT...gets even worse gas mileage than the previous model.
Now remind me....why would I buy one again???