By John Reed in London and Bernard Simon in Toronto Published: December 1 2008
Ford Motor on Monday said it was re-evaluating its options for its Volvo subsidiary, including “the possible sale” of its lossmaking Swedish premium brand.
The announcement came ahead of Ford’s presentation to Congress on Tuesday alongside General Motors and Chrysler as the three companies make their case for $25bn in federal emergency aid.
Ford said the options for Volvo were in line with “actions Ford is taking to strengthen its balance sheet and ensure it has the resources to implement its product-led transformation plan.”
Volvo reported a third-quarter loss of $458m and is in the process of laying off about 6,000 workers, or about one-quarter of its staff.
Ford has held talks with Sweden’s government about loan guarantees and other aid for Volvo. GM is seeking government aid for Saab, its own lossmaking Swedish premium marque.
Ford made no immediate comment on whether it was in contact with possible buyers of Volvo, whose largest market is the US, and which has been hit by declining demand for larger vehicles.
The US automaker said that the review would probably “take several months to complete”.
“As we conduct this review, we are committed to making the best decision for both Ford and Volvo going forward,” Alan Mulally, Ford’s chief executive, said in a statement.
Selling a car brand, especially a lossmaking one, could prove challenging as global carmakers contend with depressed markets and a contraction of credit.
GM has not yet sent out a sale memorandum for its Hummer brand, which it is seeking to sell, despite plans to do so in October. Several overseas carmakers have said they are not interested in buying it.
Ford, GM and Chrysler have warned that they could run out of cash early next year. Ford’s needs for fresh capital are less urgent than its two Detroit rivals’, but it has still asked for access to the emergency funding facility.
The three companies’ chief executives are due to make their case before a Senate committee on Thursday and a House of Representatives committee on Friday.
They were excoriated by lawmakers at their last appearance 10 days ago for bringing their begging bowls to Washington in their corporate jets.
Lawmakers are likely to seek assurances from Ford and GM that they are building leaner operations, and that US taxpayer-funded aid will not go to subsidise lossmaking operations.
GM is expected to announce that it has plans to dispose of Saab in the long term as part of the business and financial plan it presents to Congress.
The carmakers and their supporters have grown increasingly angry that, as they see it, their industry is being harshly criticised and scrutinised even as the Bush administration and Congress shower hundreds of billions of dollars onto banks and other financial institutions.
The Financial Times Limited 2008
