Although prominent investors Jerry York and Kirk Kerkorian have called on Ford to sell its Volvo unit, the America automaker has denied such a plan is under consideration. But major changes at two of Volvo’s key plants in Europe suggests Ford is prepping the Swedish company for a possible sale.
CEO Alan Mulally has privately told top executives he wants to eventually seek a buyer for Volvo , according to sources cited by the Wall Street Journal. This coincides with what Mr. York, a prominent representative of Kerkorian’s Tracinda Corp recently stated. He said he believes Ford will shed Volvo within 18 months.
The cutbacks — which aim to improve profitability at Volvo — could result in nearly 700 layoffs, according to Sweden’s Göteborgs-Posten newspaper. The company will drop one of three shifts at the Torslanda assembly plant — reducing output from 60 cars an hour to 44. No cuts are planned for the Belgium plant where the new XC60 is built.
Volvo reported a loss of $151 million in the first quarter of 2008 — a major reversal from the $94 million profit during the same quarter in 2007. To sell Volvo at the highest possible price point, Ford must first return it to profitability, and that could take twelve to eighteen months. On the other hand, a sale could come sooner if Ford can sufficiently prove Volvo is set for a turnaround.
In January, it was reported that Ford contacted HSBC, Goldman Sachs and Morgan Stanley about a possible sale of Volvo this summer. The plan has been characterized as a “secret” by insiders, but the timeframe could be inaccurate considering the work ahead.
In 2007, there was speculation BMW might acquire Volvo or Alfa Romeo as a front-wheel-drive partner to MINI . BMW later decided neither company would be a good match, so it’s very unlikely BMW will be a part of the bidding for Volvo.
