Rumor of the Week – BMW Considering Volvo Take-Over From Ford!
- May 29, 2007
- BMW, Ford, The Car Biz, Volvo
- Posted by George Peterson
- 3 Comments
There have been rumors circulating recently about BMW buying Volvo Cars from Ford. Ford Motor Company stated on May 29, 2007 it is not in discussions with BMW or any other company regarding the sale of Volvo Cars.
But sometimes where there is smoke, there is fire. This rumor has been circulating for a few weeks now. The rumor goes like this… BMW has been conducting due diligence about the possibility of acquiring another brand. Volvo Cars and Alfa Romeo have both been included in the rumor, but Volvo appears to be the strongest candidate.
Why Would BMW Need a Second Car Company?
From 1994 through 2000 BMW owned Rover – including Rover, MG, Rolls Royce, Bentley, Mini, Land Rover and the defunct names Austin, Morris, Riley, Triumph, Wolesley. Whoa, what a lineup!? BMW practically owned the British motor industry with the exception of Jaguar. Termed “The English Patient”, Rover and BMW never gelled. In 2000, BMW sold Rover Cars (MG Rover) to Phoenix Holding Group for £10. They sold Land Rover to Ford for a hefty chunk of change. They got snookered out of the Bentley name and somehow Volkswagen ended up with it. They kept Mini and have made it a great success. They kept Rolls Royce and are presently building modest numbers in Goodwood in sourthern England.
But, BMW needs additional volumes to help its economies of scale. A second company would help BMW in negotiations with components suppliers. Volvo has the heft to help handsomely.
BMW Fiercely Proud of its Independence
BMW is advertising the advantages of its independence. They look down their nose at Lexus – part of Toyota, Infiniti – part of Nissan, Acura – part of Honda, Audi – part of Volkswagen, Mercedes – part of DaimlerChrysler. So, the idea of BMW acquiring some other premium brand has to be considered from the position of strength.
European media reports have speculated that BMW wants to expand its product portfolio, and would like to add a premium brand with front-wheel-drive models to help spread out development costs for its Mini range. (BMW has been spreading some costs already co-developing the new Mini engine with Peugeot).
Volvo could be a good candidate to fill that objective. One of the reasons Ford acquired Volvo was because of its excellent front-wheel-drive large car platform that underpins the S80, XC90, S60, V70, XC70. Ford uses this platform for its Taurus (Five Hundred), Sable (Montego) and Taurus X (Freestyle) vehicle lines. The lower Volvo models have platforms shared between Ford, Mazda and Volvo. How a BMW acquisition of Volvo could untie these relationships must be a central part of any acquisition strategy. (Remember, BMW V8s powered the Range Rover until the 2006 model year – a hang over from BMW’s ownership).
Volvo Part of Ford’s Premier Automotive Group
Ford acquired Volvo in 1999 for $6.5 billion and made it a cornerstone of its Premier Automotive Group which also includes Jaguar and Land Rover (purchased for $2.7 billion in 2000). Ford has sold the fourth PAG brand – Aston Martin – to investors for slightly less than $1 billion. PAG lost $327 million in 2006.
Reports say that Merrill Lynch estimates Ford could raise over $9 billion by selling the remaining PAG brands.
Nobody’s admitting anything yet, but lets see if the denials hold up over time.
3 Comments
Good advice for Ford. Invest in your brands that actually pull in the sales. They could seriously benefit from a little consolidation on a global level, as well as national. Do away w/ PAG and perhaps even Mercury. Take that 9 Billion+ and make Lincoln the new Lexus. Take Mazda and surpass all other Sport/Youth brands in quality and performance. Lastly, create the engines Ford needs to compete w/ Toyota.
I think Ford is capable of all of this and will set them apart from its dwindling American competitors.
And…
Even though it doesn’t really help with manufacturing costs, doesn’t BMW already have a second brand? Mini USA was based in the BMW headquarters in N.J. the last time I read one of the Mini managers business cards…
DB
This comment appeared on BlueOvalForums on May 28, 2007. Thought it would be insightful to post it here too.
Autocar reports that, back in January, BMW approached Ford about Volvo. Autocar also reports that BMW pretty much tabled the idea, which is why they can report it.
Some auto blog repeats the gist of the Autocar story, only changes it all to present tense in order to make it sound like a deal is imminent.
Some yutz reporter reads the Autocar article (or the blog gist) and decides that using someone else’s story is wayyyy easier than writing his own.
Meanwhile Volvo Truck reads all this, says, “What the ????” and tells some other dumb reporter that they would rather buy back Volvo car than see them sold to BMW.
Thus rumor two starts, “Volvo Truck to buy back Volvo Car”.
Then you get this FT report which basically repeats the Autocar story, but makes it sound like the reporter did his own work instead of cribbing the Autocar report (go back and read both articles, the only thing that’s different between the two is that the FT article contains way more denials from both Ford and BMW–the substance of the ‘news’ is exactly the same.)
Cue Swedish newspaper article that quotes a Ford executive as saying that BMW approached Ford about buying Volvo. Now tell me, is this anything that we didn’t know weeks ago? That BMW approached Ford about Volvo? REALLY? Has ANY NEW INFORMATION COME TO LIGHT? No. We just now have confirmation on the Ford side (of a sort).
Now, enter from stage left, the Reuters reporter with a deadline to meet and only enough mental capacity to read the English translation of a Swedish news site.
Okay, so we’ve got Ford confirmation from a Swedish newspaper saying that the Autocar story that BMW was interested in Volvo is substantially true, so what does Reuters do? They slap a “Volvo for sale” sentence into an article that contains nary a shred of evidence that Ford actually is looking to sell Volvo.
And that constitutes “EVIDENCE” in this internet age?
Are we all so destitute of critical thinking skills, are we so bankrupt of analytical ability, are we, in short, so gullible, stupid, credulous and lazy so as to take the multiple vomitings of the same piece of stale information as something fresh and palatable every time it is set before us?
This post has been edited by RichardJensen: May 28 2007, 03:23 PM