Amidst the loss trimming, Ford revises Volvo's strategy
Ford only lost hundreds of millions during the third quarter of 2007, versus the 5-something billion they torched through for the same period in 2006. Sales and revenue are up, and while we can't see it yet, there might be a light at the end of the tunnel. Of course, it could be attached to a train, but let's focus on the positive. Ford's been eyeing the sell off of some of their PAG holdings as a way to stem their ongoing losses, and it's been speculated that Volvo could be on the chopping block. For now, though, the brand appears to be something that Ford wants to hang on to. Along with the third-quarter finances, Ford announced a new stragegy is in the works for Volvo. Mulally has pledged to improve Volvos' stature as a premium product, as well as improving their cost structure (a corporate way to say make more money on the cars by driving down costs). Volvo's platforms and technology are spread pretty liberally throughout the rest of Ford. The Taurus/Sable rides on a version of Volvo's P2 platform, and the Mazda 3, Euro Focus (yes, we know, "send it over here Ford, I'll buy one" - whatevs, you know you won't), and C30/S40/V50 are all on the C1 platform, while the EUCD platform which underpins the S80 and the new XC70/V70 wagons, as well as the upcoming Lincoln MKS. It would be hard for Ford to just cut the brand loose tomorrow, though reading between the lines makes it seem like they're positioning the Swedish automaker for future sale. The new plan includes improving the image of Volvo to a more premium status, distancing Ford from Volvo's operations, and fast-tracking product development. Making the division nearly an independent entity will increase its attractiveness when suitors come knocking, but it looks like Ford's biding its time for now, doing prep work to ensure a fat sale price when the eventuality occurs.
[Source: LLN]
Reader Comments (Page 1 of 2)
Matt 11:19AM (11/10/2007)
I still don't understand how selling off a brand that MAKES THEM MONEY would help with "stemming losses."
Call me crazy...
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RicardoHead 11:55AM (11/10/2007)
The numbers below are just not real and only to demstrate a point.
Let's say Volvo has a market value of $10 billion if they sell and it and it currently profits $200 million/year. That's 2% on their money.
Now let's say Ford can sell Volvo for that $10 billion and invest it to yield 6%, or $600 million. They just stemmed $400M more losses than before and don't have the management headache to boot.
Or if they can use the money from the sale (they are cash strapped, remember) to invest in new production equipment that will significantly drop production costs on high volume units elsewhere thus yielding far in excess of that $200M Volvo profit, or to speed R&D on newer highly profitable products - it is the same. As long as they use the money to to produce returns in excess of what Volvo is producing, they are stemming losses.
The Other Bob 12:46PM (11/10/2007)
"The numbers below are just not real and only to demstrate a point...."
Nice point Ricardo. You made me think about it in another light.
www.dentalcareandhealth.com 11:28AM (11/10/2007)
Sounds like one crazy plan alright!
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Reuben 11:29AM (11/10/2007)
Hey autoblog, the Mazda 3, Euro Focus, and c30/s40/v50 are on the c1 platform. The others are on EUCD.
Hopefully, they don't sell Volvo...ever. It has much more potential in the future than Jag or LR
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Dan Roth 4:08PM (11/10/2007)
Thanks for catching that, Reuben - you're right, my oversight. The EUCD is an evolution of the C1, but the smaller cars do ride the C1.
Thanks, fixed now.
Dan
Reuben 4:31PM (11/10/2007)
Thank you I don't mean to be a dick, just spreading what little info I know
And yes, as you said the EUCD is pretty much a larger evolution of c1
Aetius 11:54AM (11/10/2007)
I agree. Mazda and Volvo make excellent platforms (as shown by the C1 Platform). Keep them. Get rid of the rest and Mercury and start focusing on making good cars at FORD itself!
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Paul P. 12:19PM (11/10/2007)
I think holding onto Volvo might work for Ford. While I'm not a fan of Volvo's styling, I do like their use of Inline engines and available AWD throughout their model range. I think those hallmarks, combined with their perceived image of making safe and solid cars, could be worked into a solid luxury brand similar to BMW.
With that said, I think Volvo needs to bring back their "R" models as well. Mercedes has their AMG, BMW their "M", Audi their "RS/S", Caddy their "V", Porsche their "Turbo" and "GT" models, ect. For a luxury brand to be taken seriously it seems like they need a high performance "skunkworks," or at least some high performance variants out there, showing off what they can do.
(IMO, They should get some of the guys from Heico Sportiv to help design their new "R" models. The S80 they did for Sema is amazing. One of the only Volvos that has ever really drawn my attention.)
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mike 12:24PM (11/10/2007)
The real question is is Ford Mismanaging Volvo.
- Volvo has that nice 1.8 liter diesel in Europa, why aren't they selling that in the USA?
- Volvo's AWD works with the 6 cylinder in Europe, but, in the US Volvo can only sell it with the V8.
- Volvo is selling Horsepower in the US? That's a CLEAR indication Ford doesn't know how to sell Volvo cars. If there's ever a brand that could sell Safety and Efficiency, it's Volvo.
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British_Rover 6:37PM (11/10/2007)
There are so many problems with getting a diesel in the US believe me they are working on the problem but it is not as simple as just bringing the engine over here. Look at how many problems VW and Mercedes have had with getting diesels over here right now and they have been doing it off an on for years.
Err You can get AWD with a couple of Six Cylinder Volvos. The S80 T6 for one and the XC90 with the 3.2 for another.
They are selling Horsepower with the V8 XC90 and the V8 S80 which is what people in that market segment want. Those two vehicles are going up against the V8 X5 and the 550i which are big Horsepower cars.
Andrew L 12:39PM (11/10/2007)
This might not be so good cause Ford might put Volvo right were Jag is now and let Lincoln and Mercury suffer again....
I just hope they dont do that and let Lincoln get back to were it was a few years ago... competing against Cadillac
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DJ 12:38PM (11/10/2007)
As a current owner of an XC90 and S80, I never understood Ford's desire to sell Volvo. Ford needs Volvo FAR MORE than Volvo needs Ford.
Volvo has given Ford so much technology advancement in safety, FWD, platform design suitable for the EU market and more. What has Ford given Volvo other than partnering them with other PAG brands, Jaguar and Land Rover, in combined dealerships. Volvo never needed Ford's money. They were profitable before the purchase. Whatever happens, I hope Volvo continues to do what it is doing now and continues to grow. They have some great product development in the pipeline and their future is far brighter than Ford's.
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AMcA 1:25PM (11/10/2007)
No, Volvo need Ford badly, too. Volvo could not survive without Ford platforms - and so-called Volvo platforms wouldn't exist, and wouldn't have been developed without Ford sharing them. Volvo's just to small.
DJ 12:42PM (11/10/2007)
"Mike - Volvo's AWD works with the 6 cylinder in Europe, but, in the US Volvo can only sell it with the V8."
You must be referring to the 2007 S80. It is now available with the turbo 6 and in Canada, it can be had with the non-turbo 6 and AWD. That config is coming to the US in 2008. Every other Volvo model that offers the 6 in the US is available with AWD.
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Cameron 12:43PM (11/10/2007)
So after all this time of owning Volvo and changing Volvo, they've finally realized they should let Volvo go back to what they were doing! What a revelation!
The C30 made me sad. Almost $27K (decent options) for a mushy hatchback when I can get all the WRX I want for $25K? I understand Volvo is "premium," but take a gander at the C30 interior and it just isn't premium enough to warrant the price gap. I was hoping for a stylish AWD hatchback alternative to the WRX/GTi. I will give the Dynaudio system the credit it deserves. One of the better stock audio systems under $33K, if you're into stock audio that is.
$300 "custom charge" just to choose my own options? You've got to be kidding me, Volvo. No cruise control standard on a car that costs that much? Unacceptable. CC is standard on many cars costing thousands less. Not very premium if you ask me.
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vdk 1:15PM (11/10/2007)
The C30 looks pretty chique to me. And the interior is slick... looks way too awesome there's nothing like it in the business. Version 2.0 starts at $25.7 and it's got everything you could ask for... # Dynamic Chassis
# 18" Atreus Alloy Wheels
# Sport Body Kit and Rear Roof Spoiler
# Dynaudio, 650-Watt, 10-Speaker Audio System with Dolby ProLogic II Surround Sound
Show me all this on that WRX, did I mention the WRX looks ridiculous?
Cameron 2:17PM (11/10/2007)
It also has one of the worst shifting transmissions in the buisness. Even the "dynamic chassis" is soft enough to put the driver to sleep. Tack on the options that people want, and suddenly the C30 is priced past its target audience. Not to mention the nearly $800 delivery charge, one of the highest in the industry.
I think the C30 LOOKS sharp, the interior is okay, but overall it just doesn't justify the price in such a fiercely competitive segment and target demographic. It's premium price for something that honestly doesn't feel THAT premium.
The WRX is just so much car for the money, I'm not just picking on the C30, I don't think hardly any car can beat the WRX's bang for your buck.
FYI: I priced out a C30 2.0, with ice white paint, the kalix/quartz interior, cruise control (i can't believe this isn't standard on a "premium" car), cargo cover, rear arm rest, wheel locks, and grocery net and it came to $27.4K. That is a LOT for a FWD hatchback. I didn't even touch any of the climate packages, power seats, heated seats, xenon headlamps, etc.
Paul 5:57PM (11/10/2007)
I am a bit of a fanboy BUT Cameron you have NO clue what you are talking about.
You are comparing things that shouldnt be compared - price it out identically to a Mini and you will see that they are basically dead even...
That said volvo needs to get the R back to where it should be and freaking MARKET IT. I have a T5 S60 and tons of people ask me "whats that" 99% of the general public has no clue there is a performance volvo.
jeffzekas 1:16PM (11/10/2007)
Okay, so we know the writer of this article is a snob ("send it over here Ford, I'll buy one" - whatevs, you know you won't)... the implication being: Americans are too provincial, too unsophisticated, in order to buy a "Euro-Ford". Gee, I guess having a degree from the University of California, traveling around the world, and owning a dozen European cars, makes me an unsophisticated, "whatev" buyer, right, Mr. Dan Roth? The fact is, my family has owned Austin Healey, Volkswagen, BMW, Alfa Romeo vehicles... and we would STILL by Euro cars, if they were imported to the US market. And yes, in Europe, I drove Opels and British Fords, and, guess what? Me, the "rube American", LOVED those (superior) vehicles. Mr. Roth, maybe you should leave your ivory tower occasionally, and meet your fellow Americans... you've spent too much time on the cocktail party circuit! Americans can (and will) buy the best, most interesting, most beautiful, most exhilarating automobile they can find... the problem is, US car makers are too timid, or too snobbish, or too condescending, to provide said cars.
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