Ford Has a Plan: Keep Volvo and Buff It Up
November 08, 2007

Ford said Thursday it has a plan for Volvo -- keep it for now, cut its costs and buff up the image of the Swedish marque as a premium automaker.

But that doesn't necessarily mean Ford will keep it forever.

Ford CEO Alan Mulally said Ford will keep Volvo for now, focus on improving its cost structure -- i.e. cut costs -- and reposition it as a premium brand more than a near-premium one.

But reading between the lines, Ford could be sprucing up Volvo to sell it further down the line.

Indeed, Ford has been conducting a strategic review of Volvo to decide if it should keep or sell the Swedish marque.

Ford said it wants Volvo to operate on a more standalone basis. The automaker said its first priority is to improve Volvo’s financial performance.

"We're continuing to assess our portfolio where each of the brands are and what is the best for near and long-term value creation," Ford CEO Alan Mulally said Thursday of Volvo. "What's most important [for Volvo] in the near term is to improve its fundamental cost structure. They've got a great product line and are set for the future."

Ford said, as part of making Volvo more of a stand-alone entity, it would disclose Volvo’s financial performance beginning with the 2008 results. In the past, Ford has not disclosed the financial performance of its individual brands.

Ford reported Thursday that the Premier Automotive Group (PAG), which includes Jaguar, Land Rover and Volvo (no longer Aston Martin, which was sold), had a pre-tax loss of $97 million for the third quarter, down from a loss of $508 million in the 2006 third quarter. Third-quarter revenue for PAG was $7.4 billion, up from $6.5 billion a year ago.

Ford said PAG's results reflected a loss at Volvo, partially offset by a small profit at the combined Jaguar and Land Rover operation -- undoubtedly from Land Rover more than Jaguar. Ford credited the improved performance to cost reductions across the brands, higher volumes and higher net pricing.

Volvo was "off plan," Ford's CFO Don LeClair said, due largely to the weak U.S. dollar versus the Swedish Krona as well as increased competition and higher marketing incentives. "It's important to step back and focus the next phase of work on the cost side and positioning Volvo in a premium position," said LeClair.

Ford said other parts of the Volvo plan include:

* enhance Volvo’s position as a global producer of premium vehicles;

* establish appropriate business arrangements between Volvo and Ford-brand operations to allow Volvo to operate on a more standalone basis in the absence of the Premium Automotive Group structure. The soon-to-be-dismantled PAG included Jaguar and Land Rover, which are close to being sold, the already sold Aston Martin, and Volvo;

* continue to achieve synergies between Ford-brand operations and Volvo in areas of product development and purchasing. One of the hang-ups in selling Volvo -- versus the sale of Aston Martin, Jaguar and Land Rover -- has been that its product development is closely intertwined with Ford's. The two share platforms and technologies. A sale of Volvo would require the unlikely untangling of the relationship or, more likely, a business arrangement that allows those entanglements to continue, through a straight-forward contract or perhaps an equity interest as Daimler has with Chrysler.

Posted by Michelle Krebs at 4:57 AM under Commentary , Ford , News | Comments (0) | digg this | Seed Newsvine