Ford’s Volvo has been on the block–excuse us, “strategic review”–for a while now, both unofficially and officially. So far, the flirtations with possible suitors resembled dating tours to the Philippines or Russia. A little petting, and then nothing. Now, finally, there are indications that the dalliances may enter the terminal phase: Either Ford gets a signature from a willing buyer or Volvo will be terminated. Extra urgency has no doubt been lent by the Swedish government which told GM (and by implication, Ford) not to expect a single öre, and to get on with it, or get out.
The Swedish paper Dagens Industri yesterday carried a report that there are four serious suitors for Volvo: China’s Changan, China’s Dongfeng, and–surprise–France’s Renault. As the dark horse, there is an ominously unidentified suitor. For those who have a problem understanding Swedish, Bloomberg carries a pretty good summation of Dagens Industri’s report. Ford and Volvo met with their investment bankers in London this past week, and the candidates were deemed “serious” enough to be allowed to see confidential information about future Volvo Cars models, says Dagens Industri.
The investment banks are Citigroup, JP Morgan and Rothschild. Dagens Industri said that Renault-Nissan of France was “likely” to have been the group that asked Rothschild to represent it at the meeting. Ford is reported to be asking between $3b to $4b for Volvo, much less than the $6.4b they paid. (Not accounting for inflation or counting all the money they “invested.”) At the end of the day, Ford will have to take what the market will bear.
As reported by TTAC, the unidentified suitor might be China’s Chery. Quite tellingly, China’s Gasgoo (a company owned by Chery, run by their former purchasing director) has been keeping “Chery Auto possible to buy Europe car brand” [sic] as its top story for days.
If we are to place odds, Renault should be the odd man out in the game. There are no obvious reasons why they may need Volvo, but there may be not so obvious ones. It’s possible that Renault is there to create the impression on China that there is demand elsewhere.
The most logical partner would be China’s Changan, as they are already Ford’s joint venture to make Volvo cars for China. Then there may be other goings-on in China, which don’t make the press.
For a Chinese manufacturer, a brand such as Volvo would have the most value. An established brand, especially one with a strong safety cachet, might perform miracles on Chinese export offerings, give it credibility and erase mental images of Chinese cars failing in crash tests.
Or not.
Isn’t Sarkozy pretty much wrapping up legislation to support the French makers, at the same time barring them from ‘spending’ overseas?
It will be a darned shame for Scandinavia to lose the engineering culture that has been built up around Saab and Volvo, as well as, over time, the motorsports (rally) culture that has grown up around it. But I guess it’s an inevitable consequence of their rather extreme salary compression. If everyone is going to make graduate degree income, industries where a significant part of cost is due to less specialized labor just isn’t competitive. Still, makes me want to go out and get a V70 for daily use and a hopped up Viggen with rally spikes for some frozen lake fun.
I wonder if this could have anything to do with the reason Renault just canceled its large car portfolio development? They wouldn’t need them with Volvo in their stable.
Renault picking up both Volvo and Saab would make a lot of sense. If we look at the largest car market in Europe, which is Germany, both Volvo and Saab have a good image. Germans don’t all want to buy the same car, they like interesting technology, and some variety in their car selection (a country of pistonheads, meant as a sincere complement). Renault could energize Volvo and Saab sales in Germany, which is something GM and Ford both totally failed to do. At the very least, GM should transfer Saab to Opel, and close the US dealerships.
I’d be surprised if there are any serious suitors at the present time. Chinese never get serious “before its time”. And its not time because things can be bought at lower cost out of a formal bankruptcy. So they wait. Renault, no way as stuki mentioned. Anyone else? Except a group of employees (and that won’t work), no.
“But I guess it’s an inevitable consequence of their rather extreme salary compression.”
Volvo isn’t having trouble selling enough vehicles due to salary compression.
Renault could make a good owner/partner for Volvo. They have excellent platform sharing opportunities and could use the Volvo sales channel to re-introduce select Renault products to North America.
Ford would be idiots to sell Volvo to the Chinese for the simple strategic reason that doing so would accelerate the arrival of Chinese car competitors in the US market. The last thing Ford USA needs is yet more competitors in the home market.
you know, my wife and I looked at a new s40 yesterday. she really liked it, but if china is going to buy into volvo, maybe not so much. she liked jag, too…but india, really? i’d point to acura, but there isn’t a thing style-wise I’d consider. So, what’s a guy to do for $20k to get something with a bit of style and class?
China buying Volvo? I’d hate to see them lose there , um, Swedishness…(if they had any since Ford bought them). Still, a S40 for $20k is tempting…
@John Horner,
High line worker salaries reduce the number of hours that can be spent on a car selling at any given target price, reducing engineering flexibility. At the same time, relatively less high engineering salaries, particularly in porchasing power terms, prevents the kind of ‘superstar’ concentrations of engineering talent that the IT field has enjoyed in equally high salary California.
The end result is similar quality engineers as Asia, but with each engineer having access to less (labor) resources. It’s tough to compete that way.
Car assembly workers are some of the highest paid workers so a salary compression wouldn’t lead to more expensive workers but to cheaper workers.
Here’s my idea:
1. Swedes buy up both Saab and Volvo, put them under the same (government-owned) roof
2. Put reasonable prices on Saabs
3. Make Volvos BMW/Lexus/Mercedes level of luxury (and price accordingly)
4. ???
5. PROFIT!!!