Volvo Loses $151m in First Quarter. Any Takers?
In years past, Ford resolutely refused to report earnings for the individual brands in its Premium Auto Group (PAG) (Jaguar, Land Rover, Aston, Volvo and, for ten minutes, Lincoln). And for good reason. The brainchild of former BMW suit and bon vivant Wolfgang Reitzle, PAG has been a financial sinkhole since day one. Now that Jag and Landie's gone to Tata Motors and Aston's been flogged to an unholy alliance of a Texan and the Kuwaitis, PAG consists of… Volvo. And today, for the first time ever, FoMoCo's broken out earnings in the Volvo unit. And the news ain't good. Yahoo!Finance reports that a year ago, Volvo posted a $94m profit in the first quarter. This year, they had a first quarter pretax loss of $151m. So why, when Volvo was making money, didn't they brag about it? And why, now that it's losing money, do they disclose the fact? It's just one more indication that Ford is building a case to justify putting Volvo on the auction block a la Jag and Land Rover. Adjö Volvo.
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The issue with the Swedish government is a non-issue. It just won't happen. It is as likely as GM delivering the Volt on time and under budget. A much more plausible scenario is Ford selling Volvo to someone that actually has a long-term interest in owning that brand. And that means a car maker that lacks a near-luxury premium brand in that magnitude. Like Renault/Nissan or Citroen/Peugeot. Or perhaps Tata? Tata has high-end cars and low-end cars but nothing in between. Volvo has a reputation as a solid seller in the US. That would give Tata a bigger foot in the US market. Or perhaps the best proposition for Ford is not to sell, but invest? Volvo is not in bad shape, it just lacks proper resources in the r&d and marketing divisions.
Volvo's problem isn't a lack of investment - its a lack of purpose. Everyone sells safety now, so what does Volvo do to distinguish itself (See Ford DW 44)?
If Ford put Volvo up for sale, there's one party who, I reckon, would snap them up in an instant. Mahindra and Mahindra. Think about it, they failed in their bid for Jaguar (so they clearly want a luxury brand) so reigniting talks with Ford, shouldn't be a problem, M&M have a good diesel history, as does Volvo, it would give M&M a springboard into the Indian market of selling rugged cars for rugged roads, if they let the Swedish engineers do their job again and M&M also have deep pockets (they must do to launch a bid for Jaguar) so they'll clearly look after them. All that, plus a platform into America. I can't think of a better owner.