Ford Considering Sale of Volvo

DETROIT December 1, 2008; Soyoung Kim writing for Reuters reported that Ford Motor Co said on Monday it was reviewing options for Volvo and could sell the luxury Swedish car brand as it scrambles to shore up cash amid a deep industry downturn.

The announcement came a day before Ford and the other two Detroit automakers face a deadline to submit stepped-up restructuring plans to Congress in a bid to win support for a $25 billion rescue package.

Ford, which has been shedding assets as it strives to raise cash in recent years, said the review of Volvo was part of its efforts to "strengthen its balance sheet" at a time when auto sales are plunging worldwide.

Shares of Ford jumped as much as 12 percent in morning trade, but gave up the gains to trade 23 percent lower as of 2:26 pm ET, tracking slides in a broader market and as concerns set in that the loss-making automaker would be a tough sell.

"Asset sales in the current environment are very challenging," said David Allon, a portfolio manager at Firstrust Financial Resources in Philadelphia.

"They have to look at all options but if there's going to be a buyer, it's going to be at a fire sale price," Allon said.

Volvo posted a pretax loss of $458 million in the third quarter versus a loss of $167 million a year ago as sales declined 24 percent.

Ford burned through $7.7 billion of cash in the third quarter and said last month it would make deeper cost cuts and explore asset sales in a bid to free up $17 billion in liquidity through 2010.

Volvo is the last remaining brand from Ford's former premium auto group that had included the now-divested Aston Martin, Jaguar and Land Rover brands.

Earlier this year, Ford sold its luxury Jaguar and Land Rover brands to India's Tata Motors Ltd (Bombay:TAMO.BO - News). Ford also agreed to sell about two-thirds of its 33.4 percent stake in Japanese automaker Mazda Motor Corp (Tokyo:7261.T - News) for around $538 million in November.

Reeling from the decline in U.S. auto sales to 25-year lows, Detroit's three ailing automakers -- Ford, General Motors Corp and Chrysler LLC (CBS.UL) -- are desperately trying to raise cash to survive the worst economic crisis since the Great Depression.

The three U.S. automakers are scheduled to submit extensive restructuring plans to Congress on Tuesday as a condition for considering $25 billion loans for the cash-strapped industry.

"Given the unprecedented external challenges facing Ford and the entire industry, it is prudent for Ford to evaluate options for Volvo," Ford Chief Executive Alan Mulally said in a statement.

Ford said the review of Volvo will likely take several months to complete.

BUYERS' MARKET

Volvo would join a crowded field of automotive brands being shopped around at a time when many potential buyers have pulled back. GM is trying to sell its Hummer SUV brand and could opt to unload other brands as part of its own restructuring plan to be submitted to Congress.

Chrysler's private equity owner Cerberus Capital Management has been looking for a buyer for all or part of the No. 3 U.S. automaker and has examined plans under which it would sell off specific vehicle lines, such as its Ram pickup trucks or its Jeep SUV brand.

Ford had said throughout this year Volvo was not for sale, but sources with knowledge of the situation said Ford held talks with Renault-Nissan and Hyundai Motor Co (005380.KS) about selling the brand.

Renault-Nissan Chief Executive Carlos Ghosn last month ruled out any acquisition or partnership that would involve a cash outlay, saying that his priority was to protect the liquidity of the existing alliance because of the steep and unpredictable global downturn in auto sales.

U.S. light vehicle sales for November, set for release on Tuesday, are expected to show only a limited recovery from October, when sales plunged to a 25-year low.

Earlier on Monday, automakers reported tumbling sales for November across Europe and in the markets of Japan and South Korea. Spanish sales dropped by nearly half in November, the biggest sales decline in that market in nearly 16 years.

In mid-afternoon trade, shares of Ford were down 10.4 percent, or 28 cents, to $2.41 on the New York Stock Exchange, after earlier rising to as high as $3.00.

Additional reporting for Reuters by Kevin Krolicki

FORD MOTOR COMPANY ANNOUNCES IT WILL RE-EVALUATE STRATEGIC OPTIONS FOR VOLVO CAR CORPORATION

DEARBORN, Mich., Dec. 1, 2008 – Ford Motor Company announced today it will re-evaluate strategic options for Volvo Car Corporation, including the possible sale of the Sweden-based premium automaker.

Ford said the decision to re-evaluate strategic options for Volvo comes in response to the significant decline in the global auto industry particularly in the past three months and the severe economic instability worldwide. The strategic review of Volvo is in line with a broad range of actions Ford is taking to strengthen its balance sheet and ensure it has the resources to implement its product-led transformation plan.

“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 plan,” said Ford President and CEO Alan Mulally. “Volvo is a strong global brand with a proud heritage of safety and environmental responsibility and has launched an aggressive plan to right-size its operations and improve its financial results. As we conduct this review, we are committed to making the best decision for both Ford and Volvo going forward.”

Ford said the review likely will take several months to complete. In the meantime, Ford will continue working closely with Volvo as it implements its restructuring plan under CEO Stephen Odell, who was appointed to lead Volvo earlier this year.

At the same time, 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.

“Outstanding safety, an increased focus on environmentally friendly vehicles and contemporary Scandinavian design will continue to be the foundation upon which we will build a strong Volvo business for the future.” Odell said. “We intend to build upon our strong brand heritage and to appeal to our global customers with vehicles like the new XC60 – the safest car Volvo has ever built. Volvo also will introduce seven low-emission models in 2009, giving us the best environmental product range in the premium segment.

“We have a strong brand presence in Europe, North America and the Asia Pacific region, and are growing in key markets such as China and Russia, where we are the leading premium brand.”