Return
to Story Page
To print: Select File and then Print from your
browser's menu
Anna Pettersson
Stockholm, Jan 28: Swedish carmaker Volvo has agreed to sell its car division to Ford of the United States for 50 billion Swedish kronor (5.68 billion euros, $6.5 billion), it said early on Thursday.
The sale, which is part of global manoeuvering by car groups to develop strong market positions, and might cause some soul-searching in Sweden, is conditional on Volvo shareholders' as well as customary regulatory approval.
Volvo, after disposing of Volvo Cars, its largest business, is to concentrate on its commercial products and related businesses, including trucks, buses, construct ion equipment and marine engines, the company said.
The Swedish television news journal Rapport, quoting sources close to the deal, said that Fiat of Italy had put a higher bid on Volvo but had demanded that the heavy trucks division be included in the deal, and Volvo had preferred to sell to Ford.
Analysts and media reports have speculated on a full or partial sale of Volvo for months. Ford, Fiat, Volkswagen of Germany andUS General Motors (GM) had been mentioned as potential bidders.
"This is a solution which strongly enhances both the prospects for Volvo cars, its employees and for the Volvo Group as a whole," Volvo chairman Haakan Frisinger said.
Ford has informed Volvo that Volvo Cars is to remain managed from Gothenburg, west Sweden, while having access to Ford's engineering, distribution, marketing and financial resources.
"Volvo Cars' future prospects will, by being an important part of one of the world's largest and most profitable groups, improve considerably," Volvo Chief executive Leif Johansson said.
Volvo Car's president Tuve Johannesson is to remain in his position.
The Volvo brand name will be jointly owned. Volvo will use it for commercial products, and Ford will have the right to use it for passenger cars, minivans, sport utility vehicles and light trucks.
Analysts here said Ford is a good match for Volvo, which will be able to profitfrom Ford's extensive resources for research and development, andalso gain full access to the large US market.
Volvo is also deemed to be the quality brand that Ford needs, between their luxury Jaguars, and smaller Fords on the hard-fought European market. The Volvo line would compete more with Saab, partly owned by GM.
Specialists here pointed out that it is important that Ford will let "Volvo be Volvo", and keep the brand name's strong profile of high quality with a strong focus on safety.
"Volvo is a premium automotive brand with unique appeal that represents a good Opportunity to profitably extend our lineup and grow the Ford business worldwide. Volvo is a perfect complement to the Ford family of brands worldwide," Ford president and chief executive Jaques Nasser said in a statement.
Ford has earlier been reported to be in talks with BMW of Germany and Japanese Honda.
A fortnight ago Volvo bought 13 per cent of the shares in Swedish truckmaker Scania, and signalled interest in a full merger. Analysts said the sale of the car division would provide Volvo withenough cash to place an outright bid for Scania.
Brokers said the market will now expect Volvo to bid publicly for Scania, something which is set to boost Scania's share price.
"There will definately be a bid for Scania by Volvo now. This deal means Volvo Has enough cash and so there is nothing to stop it from going ahead," one broker said.
The Volvo share price rose 3.5 per cent to 220.50 kronor in early trade, while Scania shares jumped by 6.8 per cent to 252 kronor.
Analysts also said that Volvo would now have money to use for acquisitions within the commercial vehicles industry.
"If Volvo doesn't manage to buy up Scania, then there are many other options within the construction equipment segment and in the North Amercan truck industry for example," one analyst said.
"Volvo will have about 50-60 billion kronor in cash, and together with loans itwill probably command over a purchasing sum of about 80-100 billion kronor, which is definitely enough to buy something fairly big in the North Americantruck industry," he said.
Analysts have said they expect the auto industry to consolidate with perhaps a Half-dozen mega-companies surfacing as global entities, forcing smaller players -- such as Volvo -- to join a major partner or face extinction.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
------------------------------------------------------------
This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
------------------------------------------------------------