DEARBORN, MI – Ford Motor Co. may get $1-$2 billion for its Volvo Cars unit, less than a third of what it paid 10 years ago, as it conducts sale talks with more than three bidders, according to an unnamed source interviewed by Bloomberg.
The last piece of Ford's failed strategy to boost profit with European luxury brands may take six months to complete, said the unidentified person, who preferred to remain private. The individual wouldn't name the potential buyers, reported Bloomberg.
With a $14.7 billion loss last year, Ford is trying to raise cash and buttress its balance sheet to remain the only major U.S. automaker not receiving federal aid. General Motors Corp. and Chrysler LLC are operating on $17.4 billion in low-cost U.S. loans.
Ford confirmed talks with multiple "interested parties" in a statement Mar. 25 that didn't cite names or a specific number of prospective buyers for Gothenburg, Sweden-based Volvo. The second-largest U.S. automaker, is "pleased with the numbers and quality" of possible bidders, and "is now talking in more detail," according to the statement.
Discussions are furthest along with China's Geely Automobile Holdings Ltd., people familiar with the matter told Bloomberg. Geely first approached Ford more than a year ago, before the Dearborn, Michigan-based automaker was prepared to sell, the people said. Ford has also approached China's Chery Automobile Co. and Chongqing Changan Automobile Co., according to the sources.
Ford is expected to take a loss on the sale because the global auto market has slumped so much since 1999, when Volvo was purchased for $6.4 billion, according to the person familiar with the likely price range. The Wall Street Journal reported on the talks with more than three bidders on Thursday.
Over the last decade, Ford's cars and trucks have become intertwined with the Swedish automaker's models, sharing 90 percent of components and technology. Volvo's XC90 sport-utility vehicle, for example, provides the mechanical underpinnings of the Ford Flex sport wagon.
Ford will continue to share some engineering and parts, including engines, with Volvo even after the unit is sold, said the person familiar with the talks. That complicates bidders' due diligence, requiring examinations of Volvo factories and the Ford facilities that support them, the person said.
Ford said on Dec. 1 it was considering a sale of Volvo, which had a pretax loss of $1.7 billion last year, according to the U.S. company's annual report. The Swedish brand's U.S. sales slid 31 percent.
Volvo, the maker of S80 sedans and C70 coupes, has struggled amid gains by competitors in safety technology, a longtime strength. Ford is cutting 3,400 full-time jobs at the company.
The division was once central to Ford's push to reap a third of its profits from luxury autos. Ford has been shedding European brands under Chief Executive Officer Alan Mulally.
In June 2008, Ford sold U.K.-based Jaguar and Land Rover to India's Tata Motors Ltd. for $2.4 billion. It sold its Aston Martin line for $931 million in May 2007 to a group of investors.