Potential for Swedish Intervention with Saab, Volvo Intensifies
December 01, 2008
By Bill Visnic
With Chrysler LLC, Ford Motor Co. and General Motors Corp. set to return to Washington,
DC tomorrow to present Congress with a detailed plan for restructuring their operations under terms of a desired federal bridge-loan package, reports from Europe indicate the Swedish government may be considering an active role in assuring the continued future of Saab Cars and Volvo Car Corp., owned by GM and Ford,
respectively.
And Ford confirmed Monday it is exploring the possibility of selling Volvo - despite assertions earlier this year the company did not want to part with its Swedish division - saying in a press release the company "will re-evaluate strategic options for Volvo Car Corporation, including the possible sale of the Sweden-based premium automaker."
It is widely believed the restructuring blueprints GM and Ford will present to Congress this week will include plans to pare redundant and underperforming brands from their operations - brands that are costly to support from a marketing and product-development standpoint yet are not profitable on their own. Restructuring may mean the demise of several "internal" and largely North American brands at GM and Ford, but the situation is more complicated for Saab and Volvo, with considerably more international ramifications.
The Financial Times reports GM and Ford now have approached the Swedish government about assistance in "bolstering" the two companies' finances in order to make them more attractive to potential buyers. But it is increasingly obvious that if GM and Ford are to completely sever Saab and Volvo, the situation is almost certain to involve the Swedish government. In the current global economic environment it is unlikely either Saab or Volvo can attract serious private-investor interest, and it is widely believed it has been many years since either Swedish automaker showed a profit.
Many industry analysts continue to mention European Union regulations regarding state intervention in private industry as a hurdle to structuring a plan to prop up - or purchase outright - Saab and Volvo. But one source recently told AutoObserver there are several methods that could circumvent European Union strictures - including the formation of a public-private entity through which investment or an outright purchase could be arranged.
In the case of Volvo, for which Ford paid nearly $6.5 billion in 1999, a deal also could involve AB Volvo, owner of Volvo Cars until Ford's purchase of the unit in 1999 and current producer of Volvo's longstanding commercial trucks and buses. Volvo's chairman told the Swedish press last week that the company is not interested in reacquiring its auto-making unit, but would be open to options regarding "consortiums" or other financial-aid arrangements.
The reference to consortiums could indicate one direction in which Sweden could arrange the purchase of Volvo and Saab while staying within the letter of the European Union's law restricting national ownership or aid.
"Given the unprecedented external challenges facing Ford and the entire industry, it is prudent for Ford to evaluate options for Volvo as we implement our ONE Ford (previously announced restructuring) plan," said Ford President and CEO Alan Mulally.
Ford's press release also reiterated a strategy that seems to have been set in place some time ago specifically to prepare for a split with Volvo: "Ford and Volvo will continue to put in place processes that allow Volvo to operate on a more stand-alone basis in the absence of the Premier Automotive Group structure, an effort which began in November 2007 following a previous review by Ford of strategic options for Volvo."
GM, meanwhile, paid considerably less than Ford's $6.5-billion Volvo investment to acquire full ownership of Saab, and it is believed GM's restructuring plan, like Ford's, includes shedding its Swedish automaker, leaving the strong likelihood of a trifecta deal involving a Swedish consortia that would buy both Saab and Volvo, which are cornerstones in Sweden's industrial sector.
As is typically the case in the modern era of buying and selling entire marques, any deal to sell the Swedish automakers would require provisions for the orderly transition from reliance on the current "parent" automakers' manufacturing and product-development processes. Saab's model range, for example, is heavily reliant on GM-developed vehicle platforms and powertrains. Volvo is markedly more independent in that sense, particularly for its large vehicles, which use Volvo-designed architectures. And all of Volvo's current models employ Volvo-specific engines.
In the days leading up to Ford and GM's announcement of the restructuring plans they will present to Congress, it has been speculated the Swedish automakers also would be earmarked for sale because of probable political pressure from U.S. lawmakers for assurances any "bailout" loans would not directly or indirectly fund foundering overseas operations.
Posted by Michelle Krebs at 12:07 PM under Business , Chrysler , Companies , Featured , Ford , GM | Comments (0) | digg this | Seed Newsvine
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