Volvo Sale Could Underpin Ford Rescue

Of the three major American automakers, the Ford Motor Company seems to be in the best position to weather the current economic crisis, stating publicly that they have enough funds to last them through the end of 2009. General Motors and Chrysler insist that their respective positions are a lot more desperate, suggesting that they may not have enough money to see them through until the end of the year.

Each company is painting as bleak a picture as possible in a bid to win federal loan support to keep their operations afloat during a tough economic downturn. Whether or not things are as serious as they seem to be, each automaker is planning to make key operational changes in a bid to save money, raise cash, and stay ahead of the game in the months ahead.

Ford has a 100% stake in Volvo, the Swedish automaker the company purchased in 1999 as part of its expansion into premium brands. Already the owner of Lincoln, Aston Martin, Jaguar and Land Rover, the Volvo purchase was added to the company’s Prestige Automotive Group line. Annually, Volvo plays an important part in Ford strategy, will sales topping 400,000 units. Still, the Ford Motor Company is reviewing its operation and is considering selling Volvo in a bid to raise cash.

Purchased for about $6.5 billion in 1999, no one is quite sure what the value of Volvo is today. Some believe that Ford overpaid for the company and that it is over valued, while others are saying that in light of the current economic climate, Ford would not be able to get full price as the entire global automotive market is depressed. Yet, a sale of Volvo could be what the doctor (or, in this case, the federal government) orders in a bid to secure assistance.

The sale of Volvo may or may not unwind several platform and technological sharing agreements between Volvo and the rest of Ford. Ford has widely acknowledged that Volvo has helped the automaker improved safety while Volvo has benefited from sharing several Ford based platforms including at least one jointly used with Mazda, another automaker that is partly owned by Ford.

In this day of collaboration, the chances that a new Volvo owner would continue its relationship with other automakers including Ford is quite good. One thing that everyone is learning these days is that working together saves money and protects the bottom line, spelling the difference between keeping a company afloat or unwinding a business that has failed in a tight market.

Ford may not profit from the sale of Volvo, but the funds gained would be a big help. And, if they can maintain a strategic alliance with the Swedish automaker, everyone will benefit in the form of better built cars, reduced costs, and a more stable automobile manufacturing industry.