Ford Ignores Volvo Sales Rumors. Again. Still.
Forbes reports that China's Chery Automobile is looking into a purchase of Ford's struggling Volvo division. According to Chinese media reports, Chery is shopping for some $4.4b in financing to make the purchase, although observers are skeptical that the purchase could actually take place. Chery (which is owned by the city of Wuhan) can not simply buy Volvo outright, as it has not yet been able to raise funds on Chinese capital markets. Having failed to meet the Hong Kong stock index's capital structure requirements, and with the Shanghai stock exchange taking a beating, Chery must rely on outside financing to make a play for Volvo. And as Zhang Xin, an auto analyst with Guotai Jun'an Securities points out, Chery's entire asset value is less than the rumored price tag for Volvo. Furthermore, Ford has already set up a joint venture with Changan Motors to build the Volvo S40 in China, while Chery has entered an alliance with Chrysler. And Ford is letting the considerable barriers to the deal do all the talking, as the International Herald Tribune reports that Ford once again refuses to comment on the possible deal. Still, with a new suitor for Volvo being hinted at each of the last few weeks, Ford's insistence that it is "committed" to Volvo seems just a tad disingenuous.
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Unfortunately for cash-strapped Ford, Volvo and Mazda are where they're current best designs have come from (Fusion & Mazda3). They really do need them both if they want to get out of this current mess alive. But do they have enough resources to devote to Ford, Volvo, and Mazda products to do them all justice? What it looks like to me is that Ford has decided that Volvo brings in a certain cost-savings, design value, and brand value that is worth X dollars annually. The present value of that cash stream is what they are looking for someone to drop at their doorstep. Until that moment comes, they won't say word one about selling Volvo, which is smart. That would diminish the brand value and hurt their current customer base. Only GM is stupid enough to do that (Hummer, Saab, Saturn, Buick, etc).
Now is not a great time to be forced into selling a home or a car company. Ford is almost surely trying to find a way to hold onto Volvo until better times. But, can they make it?
"Until that moment comes, they won’t say word one about selling Volvo, which is smart. That would diminish the brand value and hurt their current customer base. Only GM is stupid enough to do that (Hummer, Saab, Saturn, Buick, etc)." And Dumbler. They announced in a backhanded way that Chrylser might be for sale (I still think that Dieter wasn't thinking at that moment). Then they 'talked down' the company in the media. Next thing you know all the other auto groups were tripping over themselves to say they were not interested. It would be like me trying to sell my house and saying in the sales ad how much I disliked the property. Who would want to look at it if I did that?
I won't delve too deeply into this, except to say that the resources going to Lincoln/Mercury should go to Volvo instead. Volvo needs to have an exceptional family car that can compete head on with the Camry and Accord on the higher end of the market ($25k+). If they offer a better warranty, better driving ergonomics, a more distinctive look, and a feature or two that the competitors don't have, Ford would have the makings of an excellent foundation for the Volvo brand. I still think it can work... but I have extreme doubt that it will ever happen.