Ford Motor in Negotiations with Chinese company to Sell it's Volvo Cars Division

Posted by www.ArmenianHotSpot.com

John Revill
Automotive News
June 25, 2008 - 8:36 am ET


Ford Motor is in negotiations with a Chinese company to sell its Volvo cars division, the Swedish business publication Dagens Industri reported today on its Web site.

A Russian investor is also believed to be interested in acquiring the division, the report said.

Media reports have suggested that the Chinese company involved in talks is Shanghai Automotive Industry Corp.

A Ford spokesman said: "We have been consistently saying since the end of last year that Volvo is not for sale. We are focused on improving Volvo's business results."

Ford's new major shareholder Kirk Kerkorian, with a 6.49 percent holding, has stated he would like to see the cash strapped U.S. automotive giant divest itself of Volvo which it acquired for 50 billion Swedish crowns in 1999.

Ford's CEO Alan Mulally began a strategic review around a year ago with the sale of Volvo thought to be among his goals. However the company has denied this.

A number of automotive companies have been connected with a purchase of Volvo over the last year, including Germany's BMW and Japan's Mazda.

The Volvo brand has shown good growth over the last few years and has a revamped model line-up. Analysts believe Ford is holding out for a good market price.

Volvo says it will cut 2,000 jobs

Volvo Cars, owned by the struggling Ford Motor, said today it would cut 2,000 jobs across its operations in an effort to trim costs.

Volvo said it planned to cut its work force by 1,400 white-collar staff and 600 blue-collar workers to offset the impact of a weak auto market and surging raw material costs.

The company has long been struggling with negative currency swings, mainly due to a weaker dollar, as well as steep rises in steel prices, but recently the situation had worsened, it said.

"Previously, this had been balanced with the help of cost reduction and efficiency programs," it said in a statement.

"However, with a continued declining U.S. market, continued price increases on raw materials, and weaker market conditions in Europe, the situation has deteriorated."

Ford in November took Volvo, which reported a first-quarter pretax loss of $151 million, off the auction block and said it planned to integrate its subsidiary more closely into purchasing and development efforts and that it would focus on improving Volvo's cost structure.

Volvo said the staff cuts announced today were part of a scheme to cut costs by 4 billion Swedish crowns ($662 million).

Most of the job cuts announced today would be carried out in Sweden with 1,200 employees given notice at its operations in Gothenburg on the country's west coast.

Thompson Financial contributed to report

DexDiamonds - 6/25/2008 1:58:56 PM

+1 Boost

Damn Ford is shedding brands left and right.

sector - 6/25/2008 2:45:43 PM

+1 Boost

I guess Volvo = Safety will be no more.

Entrusting a Chinese company to build the safest cars out there is like leaving your vegan meeting catering to "fat johnny burgers & ribs" down the street.

M35MT - 6/25/2008 5:59:20 PM

+4 Boost

Again, like with Tata, they are taking on financial ownership and majority voting rights.

The R&D will remain in Sweeden with the "company".

I can buy shares of Toyota stock. Let's say I somehow acquired 51% of the outstanding shares. This does not mean I am now designing Toyotas in my apartment.

randy33 - 6/25/2008 9:52:35 PM

+2 Boost

OR, perhaps the Chinese will use the decades of highly-intelligent automotive safety research and other such assets gained from their VOLVO purchase to improve the safety of their own cars, potentially benefiting millions of people?

DROOPYSAKK - 6/25/2008 2:47:31 PM

+1 Boost

Chinese made sweetish inspired, could be interesting...maybe

MZauto - 6/25/2008 2:55:00 PM

+2 Boost

Good news

0to60 - 6/25/2008 3:52:45 PM

+5 Boost

Couldnt they have just copied it?

M35MT - 6/25/2008 6:01:11 PM

+2 Boost

I find it interesting that Mazda is a potential investor when Ford own's 33% of them. Ford wouldnt give that up though, as Mazda is actually profitable for them.

tundrahq - 6/26/2008 1:22:18 AM

+1 Boost

Good point. I think this move has more to do with cash flow than increasing profits. As for Mazda buying Volvo, maybe it's a way to continue to share parts, platforms, and powertrains.

woood - 6/25/2008 11:45:33 PM

-1 Boost

Chinese made parts will find its way into volvo parts and this will be a nightmare.

aussiemonster - 6/26/2008 1:55:24 AM

+3 Boost

There would be Chinese made parts in Volvo's already. Just because it's made in China doesn't mean its rubbish. Like anywhere there's good and bad manufacturers.