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Sale of Volvo Cars advancing: report

Representatives from Ford will be meeting with investment banks in London next week to discuss the potential sale of its Volvo Cars subsidiary, Sweden’s leading business daily reported on Friday.

Published: 6 February 2009 12:05 CET

Sale of Volvo Cars advancing: report

The paper, Dagens Industri, which did not cite its source, said four candidates were in the running to acquire the Swedish auto manufacturer: the Chinese groups Changan and Dongfend, along with a European alliance and “an unidentified” consortium.

The paper said that Ford, which wants to sell Volvo Cars for $3-4 billion, would confer in London next week with representatives from investment banks Citigroup, JP Morgan and Rothschild to discuss the deal.

It added that Renault-Nissan of France was “likely” to have been the group that asked Rothschild to represent it at the meeting.

A spokeswoman for Volvo Cars declined to comment on the newspaper report.

Ford Motor Company, despite a huge $14.57 billion loss last year, has said it still has “sufficient liquidity” to fund a turnaround plan without US government aid.

The company said in early December it was considering the sale of Volvo Cars, which it acquired in 1999 for $6.45 billion.

Sweden's Volvo regains strength after pandemic puts brakes on earnings

Volvo Group CEO Martin Lundstedt. Photo: Adam Ihse/TT

In 2020, the group saw “dramatic fluctuations in demand” due to the Covid-19 pandemic, chief executive Martin Lundstedt said in a statement.

For 2021, Volvo raised its sales forecasts in its trucks division – its core business – in Europe, North America and Brazil.

However, it said it also expected “production disturbances and increased costs” due to a “strained” supply chain, noting a global shortage of semiconductors across industries.

The truck making sector is particularly sensitive to the global economic situation and is usually hard hit during crises.

In March, as the pandemic took hold around the world, Volvo suspended operations at most of its sites in 18 countries and halted production at Renault Trucks, which it owns, in Belgium and France.

Operations gradually resumed mid-year, but not enough to compensate for the drop in earnings.

With annual sales down 22 percent to 338 billion kronor (33.4 billion euros, $40 billion), the group posted a 46 percent plunge in net profit to 19.3 billion kronor (1.9 billion euros).

Operating margin fell from 11.5 to 8.1 percent.

However, the group did manage to cut costs by 20 percent.

“We have significantly improved our volume and cost flexibility, which were crucial factors behind our earnings resilience in 2020,” the group said.

Volvo's business regained strength in the second half of the year.

“Customer usage of trucks and machines increased when the Covid-19 restrictions were eased during the summer and this development continued during both the third and fourth quarters,” it said.

“Both the transport activity and the construction business are back at levels on par with the prior year in most markets.”

For the fourth quarter alone, the company reported a 38-percent rise in net profit from a year earlier.

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