Rumor of the Week – BMW Considering Volvo Take-Over From Ford!
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.