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Analysts mull implications of Ford without Volvo

Analysts mull implications of Ford without Volvo
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First Published: Tue, Jul 17 2007. 11 43 AM IST
Updated: Tue, Jul 17 2007. 11 43 AM IST
Detroit: If Ford decides to sell the successful Swedish luxury unit Volvo, it could mean a lack of strong bids for its Jaguar and Land Rover units at a time when Ford is restructuring its North American operations, analysts said on Monday 16 July.
“The lack of interest in Jaguar, Land Rover and the low level of cash that would be generated by their sale have prompted Ford to consider a sale (of Volvo),” Paul Newton, an auto analyst at Global Insight, said in a research note.
Newton was referring to reports on Sunday 15 July that Ford was considering selling Volvo.
Ford does not breakout financial results of individual brands, but Volvo is widely considered to be the automaker’s most valuable luxury brand.
A Ford spokesman said the automaker was not in discussions with any company to sell Volvo.
There was speculation in the market in May that Ford was going to sell Volvo.
The company, which lost $12.6 billion last year and has given up about 1% point of US market share every year since 2000, is slashing capacity by shuttering 16 plants and cutting more than 50,000 jobs under a plan it calls the ‘Way Forward’.
Ford said in June it was working with financial advisers on options for luxury brands Jaguar and Land Rover, including sale.
“It appears that it is becoming increasingly tough for the company to restructure its core US operations, and this may place further pressure on it to offload its Swedish unit,” Newton said, adding that Volvo is expected to be valued at about $8 billion.
Argus Research analyst Kevin Tynan said Ford could also be looking at shoring up cash going into labour contract negotiations with the United Auto Workers union this month.
“Restructurings are expensive, especially if it’s not going well,” Tynan said.
The company, which expects to be profitable in 2009, has seen US sales slide 12 % through June this year and currently has a 16.6% US market share.
The profitability of Ford’s luxury brands Volvo, Jaguar, Aston Martin and Land Rover, dubbed the Premier Automotive Group (PAG), has been erratic. The group lost $327 million last year before taxes.
Ford sold Aston Martin last March for $925 million.
Analysts have said that any move to raise capital can be seen as a hedge against a slowing U.S. auto market and the possibility of a production disruption as a result of contract talks this summer between US auto companies and the UAW.
Ford’s larger competitor General Motors Corpsold its Allison Transmission unit last month for $5.6 billion.
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First Published: Tue, Jul 17 2007. 11 43 AM IST
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