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Ford: We need Volvo

2007-07-16 16:20

David Runk

Ford, responding to reports that it is putting its Volvo unit up for sale, said it is not negotiating with anyone to sell the Swedish carmaker.

The Sunday Times, citing unnamed sources in London, said the decision to sell Volvo, which is part of Ford's Premier Automotive Group, was made in the past two weeks, but that the timing of the sale had yet to be decided.

The New York Times, in a story posted Sunday on its website, said Ford would entertain offers for Volvo following a board meeting last week. The newspaper cited people whom it didn't name who it said had knowledge of the situation.

Ford spokesman Tom Hoyt said in an interview with The Associated Press on Sunday that the company was not commenting on speculation about Volvo's future. But later in the day, he issued a denial that the automaker was in talks to sell the unit.

"To my knowledge, we are not in negotiations with anyone about the future of Volvo," Hoyt said.

When Ford last August announced it was exploring the possible sale of its Aston Martin luxury sports car brand, the automaker left open the possibility that other Premier Automotive Group brands, including Volvo, could be sold.

Automotive analyst David Cole said if Ford's cash flow problems were desperate enough, selling Volvo might make some sense.

"You could get cash out of it, which is very important right now," said Cole, chairman of the Center for Automotive Research in Ann Arbor.

Financing package

Ford in December finalised a $23.4bn financing package to fuel its restructuring and cover expected losses in its automotive operations. It pledged domestic plants and other automotive assets as collateral.

No bank had been appointed to handle the Volvo transaction, both newspapers said. The Sunday Times said the deal could be worth $8bn.

Ford acquired Volvo from Sweden's Volvo AB in 1999 for $6.45bn.

Last month, Ford said it was reviewing its position on Premier Automotive Group brands Jaguar and Land Rover, fueling speculation the company was getting closer to selling the brands.

Ford sold Aston Martin for $848 million in March, with some analysts saying the brand did not fit into Ford's long-term survival plan. That plan includes cost savings by developing multiple models worldwide on the same underpinnings.

The possible sale of Volvo comes as the company is struggling to return to profitability in the face of fierce competition from Asian carmakers and developing tastes for more fuel-efficient models in its key North American market. It is slashing thousands of jobs and plans to close plants to cut costs.

Dearborn, Michigan-based Ford posted a narrower loss of $282m for the first quarter. The Premier Automotive Group reported a record pretax profit of $402m for the quarter, due largely to Volvo.


And Ford has been relying on Volvo, Cole said, as it tries to globalize its engineering, design and manufacturing systems.

Cole questioned why Ford would want to spin off Volvo, particularly because of how much Volvo is part of Ford's design and production operations.

He noted Ford's reborn Taurus debuting for the 2008 model year is being built on a Volvo platform.

Should Ford decide to sell Volvo, it would need to ensure that the cooperation continues, Cole said.

"Volvo is really an integral part of Ford," Cole said.

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