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May.29

11:06 AM ET

Tuesday, 29 May 2007

Ford Selling Volvo? BMW Interested

Posted By:Phil LeBeau

Topics:Europe (West) | Automobile Industry

Sectors:Automobiles and Parts

Companies:Ford Motor Company

AP
Here's one to get the auto world buzzing. There are reports out of Europe that Ford [F Loading... () ] is considering selling its Volvo brand to BMW. This could be an intriguing deal for both companies. But would it make sense? I'm not so sure.

From Ford's perspective, Volvo is the best selling and most valuable brand in Ford's Premier Auto Group (Jaguar and Land Rover are the other brands) and has long been considered the asset "most likely to be sold." In fact, the Ford board has reportedly kicked around the idea of selling Volvo for some time.

Ford is a company still looking to raise money after selling Aston Martin for $925 Million and leveraging the firm to the hilt since the arrival of new CEO Alan Mulally. But will Ford get anywhere close to the $6.4 Billion it spent to buy Volvo back in '99? No. On top of that, getting rid of Volvo would leave Ford with a weakened premium brand portfolio. Lincoln is a long ways from being revived. Jaguar is being "refocused" and Land Rover, while sales were up last year, finds itself competing in a market with more and more upper-end crossovers and SUVs.

As much as it may not make sense for Ford to sell Volvo, what about BMW? Volvo brings plants in Belgium and Sweden -- not exactly places with lower costs. The brand has virtually no exposure in Asia. And by next year, most of the Volvo models will be built on Ford platforms, with a good percentage having Ford engines as well. In other words, BMW would be buying a brand that it would have to spend 4-5 years to "adjust" so it operates within the BMW framework. Is the cachet of Volvo worth that time and money?

A few years back when Daimler Benz was expanding globally, BMW chose the approach of staying focused on the core brand, while quietly and effectively building the Mini and Rolls-Royce brands. One could argue BMW's approach was the right one, when you look at the problems Daimler experienced with Mercedes a few years ago and the turbulence at Chrysler that ultimately ended with the sale of the American automaker. Sometimes bigger is not better.

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