Sell Volvo? You Bet

The Queen was in dire straits. She needed cash, and quick, to fend off the plague of three-headed dogs that had taken to roaming the countryside in a weird fever, devouring peasants and small children. Granted, there wasn’t much left to sell – but the dogs were at the gate of the castle, so surely there was something that someone would want, a pretty thing she could get a good deal on.  There was her daughter, the princess, who was certainly pretty and sexy, but also moody and my, could that young lady burn through an allowance! There was also the servant girl, a Swede by birth, with sturdy legs and a good, hearty work ethic. The only problem was that she did quite a bit around the old castle – she even knew how to sew, and cook – whereas the princess was a lazy, petulant girl who cried when she missed her massage.

The Queen knew that no one would buy that. She, just like the Ford Motor Company, understood that serious buyers were coming only for the hard working, pretty-in-the-face Swede. You’ve got to give to get, after all, and for Ford, that means Volvo. Period. No one in their right mind would buy Jag-u-are right now: the bleeding cash, the enraged dealers, Jag is a problem that actually takes more than good cars to turn around. Few prospective buyers would invest in Land Rover, either. Despite its value, it is a premium off-road SUV brand in a world of rising gas prices, shrinking wallets and increasing environmental concerns. On its own, perhaps – but with Jaguar, that is just too much red and too much risk for a buyer to take.

That leaves Volvo, and now’s the time. Most analysts agree that you can get $8 billion for Volvo, up from the $6.45 billion it took to buy the company in 1999. That makes it a win for Ford in the papers, and in reality, because that $8 billion gives the Dearborn Dears what they so desperately need: more cash, and time, to figure out the next way forward for FoMoCo. With all that coin, Alan and Bill may possibly be able to build the fund that helps Ford get out from underneath the healthcare crisis that threatens the very health of the company, and they may have enough cash left over to develop new cars and trucks. They could kill off some slow selling brands (Mercury) and re-invest in what works for Ford: a true American luxury competitor to Cadillac in Lincoln, and class-leading vehicles for the Ford Oval, with small cars and sedans borrowed from Mazda. Of course, any deal would include Ford using the Volvo platforms as currently configured, so they get the best possible result: $8 billion and the right to build cars such as the 2008 Taurus in the Volvo way, until their own technology catches up. 

But wait. Why would they sell one of the few auto brands people want to buy? The one  largely responsible for the Premier Automotive Group’s (PAG) record pretax profit of over $400 million last quarter? Remember the axiom: you have to give to get, and you get nothing for Jaguar. In the long term, $8 billion goes farther than Volvo if you’re Ford. Fact is, Volvo looks better today than it really is, like a chubby girl in dim light. Thanks to the launch of the C30 hatch and the innovation of several key safety features such as the BLIS blind spot indicator system, Volvo is the trendy now car of the moment – something sure to fade as soon as someone notices that Volvo price tags are too high, and that eventually, everyone else will have their most critical technologies. Chances are good that a major market winner – think Camry – isn’t coming from a premium brand like Volvo. Indeed, the shift in car buyer priorities toward smaller, more fuel-efficient vehicles also means that Mazda and Ford of Europe will soon become more integrated into the Blue Oval; from the Mazda2 to the Euro Focus and smaller family vehicles such as the Mazda5, Ford has the ability to revitalize its lineup with little, if any, help from Volvo.

Sell Volvo? You bet. And with all that money, build out your healthcare fund and upgrade all vehicles – start with the interiors, please – and kill the cars that have no chance of winning over skeptical buyers, like the Ranger pickup. Focus on what wins, get rid of the losers and toss Jaguar into the deal as a going away present. Sell Volvo? You bet. It could actually be the best way for Ford to save its kingdom.

Published on www.myride.com

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