Volvo: Plan B
Ford has consistently denied that it wants to sell Volvo– ever before it started to sell Volvo. Citing some wild ass speculation a variety of unnamed sources, CNN Money reports that FoMoCo is considering off-loading 85 to 90 percent of Volvo to Swedish investors (the flying Wallenbergs?). The second part of that story certainly makes sense. As the cryptic report says 'Volvo Cars today is strongly integrated with Ford technically, for components, and sourcing." And just in case you thought the sale would directly lift Ford's bottom line, let's not forget this little factoid, courtesy of The New York Times: "Volvo was among the wide array of assets that Ford pledged as collateral last year when it borrowed $23 billion to finance its overhaul program. If Volvo is sold, Ford will have to repay the value of the loans backed by Volvo assets, adding pressure on Ford to get as much for Volvo as possible."
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I think Jill Wagner should be the last one out turning off the lights. The procedes of all sales goes to the banks. Ford sells productive assets just to retire debt. Wonderful position they are in... It's like having to sell your car to pay your mortgage and finding you have no way to get to work to earn money. Note: You can live in your car but you can't drive your house.
There is logic to this. If they can sell most of Volvo and retain management control with a 30% or so stake like they do with Mazda. At this point the cash is badly needed. So far as I can tell there is nothing that Ford owns that isn't mortgaged including the blue oval. I wonder what the monthly payment is on $23B?
I just hope that Volvo survives when Ford keels over. I think Ford is likely to go tits up first, but in no way would I ever suggest that any of the 2.8 Detroit Motor Companies will survive in any form, never mind being owned by the Chinese. Give it five years and the automotive landscape is going to be "rather different" (to use a bit of understatement). Watch this space in September-October-November-December when the UAW and big 2.8 duke it out. Nobody is going to come out as winner - except Toyota, Honda, Renault-Nissan and Hyndai-Kia stock holders (eventually).
OK, you want the truth about cars? The real truth? Ford doesn't need cash right now. They have $36 billion. What they need are reduced liabilities and distractions from their primary brand: Ford. Ford is off-loading Jaguar, Land Rover and Volvo not to raise cash, but to reduce the liabilities and resources needed to continually update all its model lines. Further, stumblings in any one group, if separated, won't bring down the others (imagine if Ford hadn't decided to buy Jag outright and then have to pump $10 billion into it because it was now their liability). Ford's goal is to retain a partial stake (around 15-20%) in all of these brands to keep their ability to collaborate and share technology, much as Ford does with Mazda, and allow Ford to focus on Ford (and Lincoln) without having to worry about Volvo, Jag and LR. A set up like this will allow risk sharing for a platform. So, when Ford launches the C2 in 2010, Volvo will have a stake in it, will be sharing the costs, and Ford won't have to take 100% of the risks and investment. Further, Volvo can do with the platform what they'd like without Ford dictating design or features (sort of like Mazda with Ford's C1), hence growing the Volvo brand separate from the strategy of the Ford brand. The strategy does not mean that Ford is crumbling. In fact, they are actually doing something that will help their long term health and development strategies. The only caveat with a Volvo sale is that it would have to cover the amount borrowed against the Volvo nameplate, and from what I understand the Swedish investors know that. This efforts to turn Ford into Ford again and maintain tie-ups with its former luxury divisions is a stellar move by a stellar business strategist. Ford tapped the right CEO, let's just hope it was soon enough to save the farm.