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Ford to keep Volvo - for now

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Ford to keep Volvo - for now

James Franey

Automotive News

November 8, 2007 - 9:33 am ET

UPDATED: 11/8/07 12:48 p.m. EST

DETROIT -- Ford Motor Co. is holding on to its Volvo brand -- at least for now.

In its third-quarter earnings report issued today, Ford said it has developed a strategic plan for Volvo. The statement did not indicate the long-term outlook for Volvo as part of Ford, but the unit will remain a Ford unit for now.

“Our plan now is not to sell Volvo but to improve its cost structure and brand positioning. I think we can do substantially better than where we are today,” said Ford CEO Alan Mulally in a conference call announcing the company’s third quarter results for 2007.

Mulally however refused to rule out a future sale, saying Ford would “continue to review its brand portfolio.”

Ford wants Volvo to operate more independently and achieve greater efficiency by cooperating on product development and purchasing.

“This suggests Ford is not going to change anything immediately, but is keeping its options open longer-term,” wrote Jonathan Steinmetz, head of automotive research at Morgan Stanley in New York.

Ford said that Volvo made an undisclosed loss in the third quarter of 2007, although sources familiar with the company said it was “more than $100 million.”

The strong Swedish krona makes it more expensive to sell Swedish-built Volvo cars in the US. Despite that, there are no plans to build an assembly plant there. "The payback on a North American plant is pretty long,” Volvo CEO Frederik Arp told Automotive News Europe in July.

Volvo, along with Jaguar and Land Rover, forms part of the Premier Automotive Group (PAG), a Ford subsidiary set up in 1999 to oversee the US automaker’s premium brand operations.

Ford said the first priority of the strategic plan is to improve Volvo’s financial performance. Volvo lost money in the third quarter, Ford said.

"The most important thing we can do in the near-term is improve the cost structure, so that's what we're going to focus on," Mulally said.

Ford said the plan for Volvo also includes:

* Enhancing Volvo’s position as a global maker of premium vehicles

* Establishing appropriate business arrangements between Volvo and Ford-brand operations to let Volvo operate more independently

* Getting more efficiencies between Ford-brand operations and Volvo in areas such as product development and purchasing

* Disclosing Volvo’s financial performance beginning with 2008 results.

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