Jump to content
  • Greetings Guest!

    CheersandGears.com was founded in 2001 and is one of the oldest continuously operating automotive forums out there.  Come see why we have users who visit nearly every day for the past 16+ years. Signup is fast and free, or you can opt for a premium subscription to view the site ad-free.

Sign in to follow this  

BMW-Volvo? Not So Fast, Pundits

Recommended Posts

BMW-Volvo? Not So Fast, Pundits


The blogosphere lights up with rumors, but is Ford really dumping Volvo?

by Jim Burt (2007-05-29)

Posted Image

courtesy of the car connection

Blogs, newspapers, and tongue-wagging auto executives have been trying to push BMW and Volvo to the altar for a year. The likelihood of the German automaker buying the Swedish carmaker from Ford doesn't look any closer today, though published reports would have us believe otherwise.

Executives at both Ford Motor Co. and BMW AG said Tuesday that there have been no formal discussions between the two companies about the German automaker acquiring the ailingU.S. automaker's Volvo car business. A report of the possible sale was initially reported by Swedish daily newspaper The Goteborgs Posten and then the Financial Times of London last week. But reports that BMW was examining Volvo's financials have been popping up on blogs for months.

A BMW executive speaking off the record Tuesday said he would not rule out the possibility that BMW's strategic planning and financial departments were not studying a scenario in which BMW would acquire Volvo as "a normal business planning exercise."

Ford spokesman Tom Hoyt said, "Ford Motor Company is not in discussions with BMW or any other company regarding an interest in the Volvo Car Corporation. We have seen this kind of speculation for the past year, as Ford Motor Company has been assessing our operations and portfolio - as any good business does and we will continue to do."

Some Ford executives might find it desirable to sell Volvo, but it could be tough. Ford executives have said privately that Volvo has been operating at around a break-even level for two years with some red ink.

Of the three premium brands Ford has in PAG - Volvo, Jaguar and Land Rover - there is widespread belief that Volvo is the most valuable to Ford. Merrill Lynch estimates that all three brands could bring Ford more than $9 billion. Between $7 and $8 billion of that would come from Volvo.

CEO Alan Mulally has defended ownership of the premium three brands, including endorsing their future product plans. Privately, Ford executives say that is posturing to keep potential buyers interested. Mulally is not believed to be keen on Ford's luxury brands. Mulally, who came to Ford from Boeing last September, has talked about building up the Ford brand globally, creating huge money-saving efficiencies and a single worldwide brand strategy as the best means for taking on Toyota.

But a divestiture of Volvo would be tough on the system. Ford, as well as Mazda, in which Ford owns a 37-percent controlling stake, has been creating engineering and purchasing efficiencies with Volvo since Ford bought the Swedish automaker in 1999. The current Volvo S40/V50, Mazda3, and Ford (European) Focus shared engineering development and purchasing costs. Ford currently builds three models - the Ford Taurus, Mercury Montego, and Ford Taurus X - off the engineering platform of the Volvo S80. Ford plans two more vehicles, the Ford Flex and a Lincoln crossover SUV, off the same engineering platform.

Why BMW might be interested in acquiring Volvo is harder to guess than the reason Ford might want to sell. BMW was roiled in the 1990s over its purchase of the British Rover Group. BMW acquired Rover, Land Rover and MINI, and lost, by some estimates, in excess of $10 billion before jettisoning Rover to an investment group for no money and Land Rover to Ford. It kept MINI, which has been a big sales success for BMW worldwide as the Munich-based automaker remade the MINI Cooper product line and brand image.

BMW chairman Norbert Reithofer is facing sales growth issues. Though the company has added the 1-Series small cars to its lineup in the last three years, and is planning to launch a multi-activity vehicle, there is worry that the BMW brand is getting filled out, and that adding more vehicles could water down its valuable brand equity in the premium price categories.

But acquiring Volvo would give BMW a relatively healthy global brand that needs financial discipline, manufacturing efficiencies, and brand marketing know-how applied to it. Volvo cars and SUVs are engineered to be front-drive, while all BMW's vehicles are rear-drive. While it is unlikely that BMW would ever build a Volvo and BMW off the same engineering platform, there could be enormous savings from engineering systems and parts, such as engines.

Volvo would not present BMW with the same outdated and dysfunctional operations, manufacturing and labor that beset Rover. BMW would be gambling that its ferocious financial and operational discipline would whip Volvo into shape. Volvo has been somewhat static in the U.S. and losing ground in Europe outside Sweden . BMW could make it more of a global brand than it is today, especially in the developing Asian market.

BMW shares closed Tuesday up 85 cents, or 1.7 percent, to 50.60 euros. Ford shares, meantime, closed down 5 cents to $8.40.


Share this post

Link to post
Share on other sites

Your content will need to be approved by a moderator

You are commenting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  

About us

CheersandGears.com - Founded 2001

We ♥ Cars

Get in touch

Follow us

Recent tweets



Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.