For the last several months Ford has denied rumors that it preparing its Swedish Volvo brand for sale, but, in light of pending federal aid, the Michigan automaker has openly admitted that it plans to sell its loan remaining PAG brand. And now, thanks to an inside source, we now have an idea of what price Ford will affix to its Volvo brand.
According to Bloomberg, Ford will seek as much as $6 billion for the Swedish brand. That total nearly matches the $6.4 billion Ford paid for Volvo back in 1999.
However, that price may be a bit unrealistic in today’s tight credit market, according to Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Gelsenkirchen in Germany. “Anything other than a heavily discounted sale seems unrealistic,†Dudenhoeffer told Bloomberg. “For a buyer it’s the best time that one could wish for. But it’s not ideal for Ford .â€
Volvo ’s third quarter pre-tax loss of $458 million – up from $167 million during the same time period a year earlier – won’t be help Ford’s case, either.
Although no potential buyers for Volvo have been identified as of yet, there are a few likely candidates. The first scenario is that a private equity firm would purchase Volvo, similar to Cerberus’ acquisition of Chrysler . U.S.-based TPG Inc. could be the early frontrunner, having been one of four buyers vying for Jaguar and Land Rover , and having more than $50 billion in cash on hand.
The second scenario would see a Chinese automaker scooping up the Volvo nameplate. Not only would this give a Chinese automaker direct access the U.S. market, but it could also alleviate some safety concerns linked to Chinese cars as Volvo recently ranked first in an independent safety study. Chinese cars are notoriously known for performing poorly in crash tests.
Ford has yet to give a timeframe for the sale of Volvo and we’re sure there will be plenty more in the case’s development. Stay tuned.
