Musical Chairs: Ford May Unload Volvo To BMW

Everybody knows Ford is hungry for cash. They recently sold Aston Martin in an effort to line their coffers to the tune of $1 billion, and now Volvo could be the next brand asset Ford liquidates.

BMW is by no means displeased with its Mini division, but they would ideally like to find a front-wheel drive brand to pair with it in an effort to increase scale and profitability. A BMW purchase of Volvo would fit beautifully into this strategy. But it won't likely come cheap. Ford paid $6.5 billion for Volvo in 1999, so they'll be expecting a considerably larger number in today's market.

BMW currently owns Mini and Rolls Royce, so they definitely have a soft spot in the mid-range consumer market. Whether or not they are aggressive and opportunistic enough to pry Volvo away from Ford is still just rumor fodder, but this one appears to have some legs and logic. It should also be noted that Ford and BMW have a dealmaking history. Ford bought Land Rover from BMW in 2000 for $2.9 billion.

This is where we are at 'on record' with this rumor:

Executives talked to BusinessWeek on and off the record about the reports, insisting that there have been no deal discussions at the top of the company. But a BMW executive speaking not for attribution said it was "certainly possible that BMW had been studying an acquisition of Volvo as a matter of normal business planning when we know a business is potentially for sale."

Ford spokesman Tom Hoyt said: "Ford is not in discussions with BMW or any other company regarding Volvo. We have seen this kind of speculation for the past year, as Ford has been assessing our operations and portfolio -- as any good business does and we will continue to do." - Spiegel Online

Assuming this deal 'could' happen, what exactly does this do for Ford and BMW

In acquiring Volvo, which does not have anything like the dysfunctional operation, labor, and manufacturing that Rover had, BMW would be betting that it can succeed at exploiting growth opportunities at Volvo that have eluded Ford during the past eight years. Volvo's growth in North America and Europe, for example, has been slow. Its global brand image has been focused largely on safety, which has limited its fashion appeal. Despite Ford's ownership, it has remained a largely Swedish enterprise. BMW could make it more of a global brand, especially in the developing Asian market.

If Ford does find an attractive offer for Volvo, the automaker will have three choices when it comes to selling premium/luxury vehicles. It can retain Jaguar and Land Rover and slug it out with British labor for more concessions to make the vehicles more profitable. It can sell the British brands and build up the Lincoln brand, which has long been neglected in the U.S. and has no real distribution outside North America. It could also decide to launch a new luxury brand from scratch, as Toyota did with Lexus in the late 1980s with great success. - Spiegel Online

Ford's tentacles are reaching deeper into Volvo with each passing year making a sale less likely over time as the sale transition to a potential buyer increases in complexity. Ford wants/needs cash so presumably anything could be for sale, if the price is right.

( Add your comments )

Recent Entries:
· 2011 Ford Explorer
· Honda Announces Mileage Marathon Winner
· Cadillac Converj is GM's next electric car

[ READER COMMENTS ]

Musical Chairs: Ford May Unload Volvo To BMW

Add your comments...

We kindly ask that you keep your comments relevant to this blog entry. Abusive or inappropriate comments or comments that are specifically promotional in nature may be removed.