Ford Eyes Sale of Volvo Cars

The Ford Motor Co. is planning to sell Swedish automaker Volvo Cars, and the German car maker BMW could be a potential purchaser. The Goteborgs Posten daily, a Swedish newspaper, reported last Monday on its website that a source within Ford said that BMW has been studying a possible purchase of Volvo.

The Financial Times also reported last Friday that BMW was in informal talks to purchase Volvo. "We cannot comment on speculation, this is a question for our owner," said a spokeswoman for Volvo.

Ford acquired the Swedish automaker in 1999 and it is now part of the Premier Automotive Group (PAG) of the Detroit automaker, including Jaguar and Land Rover. Ford does not reveal results for its individual brands, but taken together its luxury line-up lost $US327 million in the previous year.

Merrill Lynch has said that Ford could raise over $US9 billion by selling the remaining luxury car brands. In March, Volvo Chief Executive Fredrik Arp told Reuters that Ford was committed to keeping the Swedish car maker. He said Ford is “keeping its Volvo brand even as it spins off another luxury brand.”

He added, "Ford is very supportive when it comes to the development of Volvo cars.” Arp said he speaks with Ford Chief Executive Alan Mulally every week and added that Mulally had indicated his commitment to Volvo in a recent visit to the Swedish automaker's headquarters. "He visited us a few weeks ago and he was very supportive of developing the brand and developing the products going forward," Arp said of Mulally.

Ford has lost $US12.7 billion last year. To recover, Ford sold its Aston Martin luxury brand. Since the sale transaction, there has been speculation that spreads like the placid wind from Ford Racing cold air intake, which said that the Ford would consider selling its assets to shore up its liquidity.

Ford is targeting a return to profitability in North America, its biggest market, by 2009. Ford's European division and the PAG unit are expected to be profitable this year, said Lewis Booth, head of Ford's European operations.

The CEO added Volvo would work with Ford's other luxury brands and Ford itself on sharing components and spreading the cost of technological development in areas such as hybrid vehicles, but added that Volvo would not share platforms.

"We have a very good situation here because we extract scale economy when it's appropriate and we extract technology when it's appropriate," Arp said. "But you won't see us compromise on our brand identity and we're very attuned with Ford on that."

Separately, Arp said that Volvo expected stronger sales this year in both China and Russia - two of the fastest growing markets for luxury car makers. The Swedish automaker sold about 8,000 cars in China last year, even though it faces an import duty that adds 25 percent to the sticker price of its vehicles. Russian sales for Volvo more than doubled to over 11,000 vehicles, he said. "I think we will have excellent developments in both markets in this year."